Jasper Orange Co's trial balance at 31 December 20X3 shows a debit balance of $700,000 on current tax and a credit balance of $8,400,000 on deferred tax. The directors have estimated the provision for income tax for the year at $4.5 million and the required deferred tax provision is $5.6 million, $1.2 million of which relates to a property revaluation.

What is the tax liability recognised in Jasper Orange Co's statement of financial position for the year ended 31 December 20X3?

The following information relates to an entity:

(i) At 1 January 20X8 the carrying amount of non-current assets exceeded their tax written down value by $850,000.

(ii) For the year to 31 December 20X8 the entity claimed depreciation for tax purposes of $500,000 and charged depreciation of $450,000 in the financial statements.

(iii) During the year ended 31 December 20X8 the entity revalued a property. The revaluation surplus was $250,000. There are no current plans to sell the property.

(iv) The tax rate was 30% throughout the year.

What is the provision for deferred tax required by IAS 12 Income Taxes at 31 December 20X8?

The statements of financial position of Nedburg Co include the following extracts: Statements of financial position as at 30 September

The tax charge in the statement of profit or loss for the year ended 30 September 20X2 is $270 million.

What amount of tax was paid during the year to 30 September 20X2?

The trial balance of Highwood Co at 31 March 20X6 showed credit balances of $800,000 on current tax and $2.6 million on deferred tax. A property was revalued during the year giving rise to deferred tax of $3.75 million. This has been included in the deferred tax provision of $6.75 million at 31 March 20X6.

The income tax liability for the year ended 31 March 20X6 is estimated at $19.4 million.

What will be shown as the income tax charge in the statement of profit or loss of Highwood at 31 March 20X6?

Astral Co purchased an item of plant for $40,000 on 1 September 20X1. The plant has an estimated useful life of five years and an estimated residual value of $5,000. The plant is depreciated on a straight-line basis. Local tax law does not allow depreciation as an expense, but a tax allowance of 60% of the cost of the asset can be claimed in the year of purchase and 20% per annum on a reducing balance basis in the following years.

The rate of income tax is 30%

What charge or credit for deferred taxation should be recorded in Astral Co's statement of profit or loss for the year to 31 August 20X2?

Isaac & Joseph Co purchased new machinery on 1 January 20X5 for $1,000,000. It has a residual value of $200,000, with the useful life deemed to be 8 years. The plant is depreciated on a straight-line basis. Tax allowances of 50% of the cost of the asset can be claimed in the year of purchase, as depreciation is not allowed for tax purposes.

The rate of income tax is 30%

Identify whether a deferred tax asset or liability should be recognised at 31 December 20X5 and at what amount?

The carrying amount of Julian Co's property, plant and equipment at 31 December 20X3 was $310,000 and the tax written down value was $230,000.

The following data relates to the year ended 31 December 20X4:

(i) At the end of the year the carrying amount of property, plant and equipment was $460,000 and the tax written down value was $270,000. During the year some items were revalued by $90,000. No items had previously required revaluation. In the tax jurisdiction in which Julian Co operates revaluations of assets do not affect the tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.

(ii) Julian Co began development of a new product during the year and capitalised $60,000 in accordance with IAS 38. The expenditure was deducted for tax purposes as it was incurred. None of the expenditure had been amortised by the year end.

The corporate income tax rate is 30%. The current tax charge was calculated for the year as $45,000.

Julian Co's accountant is confused by the term 'tax base'. What is meant by 'tax base'?

The carrying amount of Julian Co's property, plant and equipment at 31 December 20X3 was $310,000 and the tax written down value was $230,000.

The following data relates to the year ended 31 December 20X4:

(i) At the end of the year the carrying amount of property, plant and equipment was $460,000 and the tax written down value was $270,000. During the year some items were revalued by $90,000. No items had previously required revaluation. In the tax jurisdiction in which Julian Co operates revaluations of assets do not affect the tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.

(ii) Julian Co began development of a new product during the year and capitalised $60,000 in accordance with IAS 38. The expenditure was deducted for tax purposes as it was incurred. None of the expenditure had been amortised by the year end.

The corporate income tax rate is 30%. The current tax charge was calculated for the year as $45,000.

Using the drag and drop options below, show the taxable temporary difference to be accounted for at 31 December 20X4 in relation to property, plant and equipment and development expenditure?

Property, plant and equipment - Development expenditure

The carrying amount of Julian Co's property, plant and equipment at 31 December 20X3 was $310,000 and the tax written down value was $230,000.

The following data relates to the year ended 31 December 20X4:

(i) At the end of the year the carrying amount of property, plant and equipment was $460,000 and the tax written down value was $270,000. During the year some items were revalued by $90,000. No items had previously required revaluation. In the tax jurisdiction in which Julian Co operates revaluations of assets do not affect the tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.

(ii) Julian Co began development of a new product during the year and capitalised $60,000 in accordance with IAS 38. The expenditure was deducted for tax purposes as it was incurred. None of the expenditure had been amortised by the year end.

The corporate income tax rate is 30%. The current tax charge was calculated for the year as $45,000.

What amount should be charged to the revaluation surplus at 31 December 20X4 in respect of deferred tax?

The carrying amount of Julian Co's property, plant and equipment at 31 December 20X3 was $310,000 and the tax written down value was $230,000.

The following data relates to the year ended 31 December 20X4:

(i) At the end of the year the carrying amount of property, plant and equipment was $460,000 and the tax written down value was $270,000. During the year some items were revalued by $90,000. No items had previously required revaluation. In the tax jurisdiction in which Julian Co operates revaluations of assets do not affect the tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.

(ii) Julian Co began development of a new product during the year and capitalised $60,000 in accordance with IAS 38. The expenditure was deducted for tax purposes as it was incurred. None of the expenditure had been amortised by the year end.

The corporate income tax rate is 30%. The current tax charge was calculated for the year as $45,000.

What amount will be shown as tax payable in the statement of financial position of Julian Co at 31 December 20X4?

The carrying amount of Julian Co's property, plant and equipment at 31 December 20X3 was $310,000 and the tax written down value was $230,000.

The following data relates to the year ended 31 December 20X4:

(i) At the end of the year the carrying amount of property, plant and equipment was $460,000 and the tax written down value was $270,000. During the year some items were revalued by $90,000. No items had previously required revaluation. In the tax jurisdiction in which Julian Co operates revaluations of assets do not affect the tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.

(ii) Julian Co began development of a new product during the year and capitalised $60,000 in accordance with IAS 38. The expenditure was deducted for tax purposes as it was incurred. None of the expenditure had been amortised by the year end.

The corporate income tax rate is 30%. The current tax charge was calculated for the year as $45,000.

Deferred tax assets and liabilities arise from taxable and deductible temporary differences.

Which of the following is NOT a circumstance giving rise to a temporary difference?

Speculate Co is preparing its financial statements for the year ended 30 September 20X3. The following issues are relevant:

(i) Financial assets - Shareholding A – a long-term investment in 10,000 of the equity shares of another company. These shares were acquired on 1 October 20X2 at a cost of $3.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $4.50 each. Shareholding B – a short-term speculative investment in 2,000 of the equity shares of another company. These shares were acquired on 1 December 20X2 at a cost of $2.50 each. Transaction costs of 1% of the purchase price were incurred. On 30 September 20X3 the fair value of these shares is $3.00 each. Where possible, Speculate Co makes an irrevocable election for the fair value movements on financial assets to be reported in other comprehensive income.

(ii) Taxation - The existing debit balance on the current tax account of $2.4m represents the over/under provision of the tax liability for the year ended 30 September 20X2. A provision of $28m is required for income tax for the year ended 30 September 20X3. The existing credit balance on the deferred tax account is $2.5m and the provision required at 30 September 20X3 is $4.4m.

(iii) Revenue - On 1 October 20X2, Speculate Co sold one of its products for $10 million. As part of the sale agreement, Speculate Co is committed to the ongoing servicing of the product until 30 September 20X5 (ie three years after the sale). The sale value of this service has been included in the selling price of $10 million.

The estimated cost to Speculate Co of the servicing is $600,000 per annum and Speculate Co's gross profit margin on this type of servicing is 25%. Ignore discounting.

Which TWO of the following are TRUE in respect of the income which Speculate Co has deferred at 30 September 20X3?

(i) The deferred income will be split evenly between the current and non-current liabilities in Speculate Co's statement of financial position as at 30 September 20X3

(ii) The costs associated with the deferred income of Speculate Co should be recognised in the statement of profit or loss at the same time as the revenue is recognised

(iii) The deferred income can only be recognised as revenue by Speculate Co when there is a signed written contract of service with its customer

(iv) When recognising the revenue associated with the service contract of Speculate Co, the stage of its completion is irrelevant