Tutorial 5 Solutions - TUTORIAL 5 SOLUTIONS Accounting for...

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1 TUTORIAL 5 SOLUTIONS Accounting for Income Tax Picker Problem 8.5 – Oakley Ltd Change in tax rate Adjusting journal entry: Dr. Deferred Tax Liability 18 200 Cr. Deferred Tax Asset 7 400 Cr. Income Tax Expense 10 800 (being recognition of change of tax rate) Working DTA DTL Opening balance at previous tax rate $29 600 $72 800 Divide by previous tax rate ÷ 40% ÷ 40% Equals opening temporary differences balances $74 000 $182 000 Multiply by new tax rate x 30% x 30% Opening balance at new tax rate $22 200 $54 600 Adjustment for change in tax rate (7,400) (18 200) (Difference between opening balances at previous decrease decrease and new tax rates) Alternative Calculation Opening balance at previous tax rate $29 600 $72 800 Adjustment for change in tax rate: (40-30)/40 (7 400) (18 200) Adjusted opening balance $22 200 $54 600
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2 Current tax Oakley Ltd Current Tax Worksheet (for year ended 30 June 2010) Accounting profit $920 000 Add: Impairment - goodwill $20 000 Amortisation – development expenditure 64 000 Depreciation - buildings 29 000 Depreciation - plant 70 000 Warranty expense
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Tutorial 5 Solutions - TUTORIAL 5 SOLUTIONS Accounting for...

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