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Deferred tax class examples solutions to example 9 20

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Accounting III Deferred Tax Solutions to Class Examples Accounting III ACCN 3004/3010 Deferred Tax – Lecture Week 1/2 (Continued) Example 9.1 – Tax loss recoverable – current year At the beginning of the 2017 financial year, Entity A had a deferred tax liability of R5 600. This arose from a temporary difference on plant with a carrying amount of R50 000. During the 2017 financial year, Entity A incurred a loss before tax of R75 000. The depreciation on the plant amounted to R10 000 and allowances amounted to R15 000. Management believe that there will be future taxable profits to utilise the tax loss. You are required to A Calculate the current normal tax payable B Calculate the deferred tax balance and deferred tax expense C Present and disclose the tax expense and deferred tax in the financial statements and notes Solution A Loss before tax (75 000) Add back depreciation on plant 10 000 Tax allowances (15 000) Tax loss (80 000) Therefore, no current tax payable Page 1 of 36 Accounting III Deferred Tax Solutions to Class Examples B PLANT Tax base Temporary differences Deferred tax 50 000 30 000 (20 000) (5 600) (10 000) (15 000) (5 000) (1 400) 40 000 15 000 (25 000) Carrying amount Tax base Temporary differences Deferred tax Movement - 80 000 80 000 22 400 Closing balance - 80 000 80 000 22 400 A Opening balance Dep/Wear tear and Closing balance UNUSED LOSS TAX Carrying amount L (7 000) L Opening balance Details ...
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