AFAB243 DEFERRED TAX Sem2 20172018 tutorial Qs.docx

AFAB243 DEFERRED TAX Sem2 20172018 tutorial Qs.docx -...

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AFAB243 FINANCIAL ACCOUNTING & REPORTING 3 SEMESTER 2, 2017/2018 TUTORIAL TOPIC 3: DEFERRED TAX QUESTION 1 The following information relates to Glass Castle Bhd for financial year ended 31 December 2014. Item Carrying amount (RM) Property, plant and equipment 95,000 Leasehold land and building 46,000 Product development expenditure 37,000 Warranty payable 28,000 Additional information: i. Profit before tax and taxable profit for the year was RM90,000 and RM75,000 respectively. ii. The amount deductible for tax purposes in the future periods relating to the qualifying assets was RM35,000. iii. Product development expenditures are claimed for income tax purpose when incurred. iv. No claims have yet been received relating to the warranty payable during 2010. v. There were no deferred taxes brought forward from the previous year. vi. The tax rate was assumed to be 30%. Required: (a) Compute the deferred tax balance as at 31 December 2014 and prepare the extract of Statement of Comprehensive Income for the year. (b) Differentiate income statement liability method (deferral method) and balance sheet liability method. (c) Define deferred tax assets and deferred tax liabilities according to MFRS112 Income Taxes . 1
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QUESTION 2 Snow White Bhd provides for deferred taxation on all temporary differences. The following items relate to its accounts for the year ended 31 December 2014: Qualifying fixed assets: RM'000 At cost: Balance at I January 2014 700 Additions 100 Disposal (30) Balance at 31 December 2014 770 Accumulated depreciation: Balance at 1 January 2014 140 Charge for the year 77 Disposal (10) Balance at 31 December 2014 207 The tax written down value of these qualifying fixed assets at 31 December 2013 and 31 December 2014 were RM368,000 and RM310,000 respectively.
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