(a) Distinguish between current tax and deferred tax.
(b) Distinguish between permanent differences and temporary differences.
(c) Explain how temporary differences between accounting profits and taxable profits would affect the tax expense shown in an entity’s financial statements unless deferred tax were taken into account.
立即答题
The pre-tax profits of Radfern Ltd for the last three years (as reported in its financial statements) have been as follows:
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Explain the concept of the “tax base” of an asset or liability. Explain how this concept helps to identify situations in which deferred tax adjustments are required.
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Consider each of the following assets and liabilities which appear in a company’s statement of financial position at 30 April 2020:
(a) A motor lorry which cost £100,000 is shown at its written down value of £20,000. For tax purposes, its written down value is £30,000.
(b) A loan payable is shown at £60,000. The repayment of the loan will have no tax consequences.
(c) An amount receivable is shown at £45,000. Of this amount, £25,000 has already been taxed but the remaining £20,000 will be taxed in the accounting period in which it is received. The whole £45,000 has already been included in accounting profit.
(d) An amount payable is shown at £3,000. This relates to an expense which has already been deducted when computing accounting profit but which will not be deducted for tax purposes until it is paid.
Compute the tax base of each of these assets and liabilities and identify any taxable or deductible temporary differences.
立即答题
The draft statement of comprehensive income of Harrington, a public company, for the year to 31 March 2020 shows an income tax expense of £55,000. The draft statement of financial position shows a non-current liability of £280,000 for deferred tax but does not show a current tax liability.
Tax on the profit for the year to 31 March 2020 is estimated at £260,000. The figure in the draft statement of comprehensive income is the underestimate for the year to 31 March 2019. The carrying amount of Harrington’s net assets at 31 March 2020 is £1.4m more than their tax base on that date. The tax rate is 25%.
Required:
Restate the figures which should appear in relation to taxation in the company’s financial statements for the year to 31 March 2020.
(ACCA)
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