Topic05_SeminarQuestions

Topic05_SeminarQuestions - Seminar Questions to be covered...

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Seminar Questions to be covered in class (time permitting) 3 Jan Seminar Topic 5 Accounting for income tax • Reconcile profit before tax to taxable income in order to recognise current tax • Distinguish between the carrying amounts and tax bases of assets and liabilities in order to determine assessable temporary differences and deductible temporary differences • Recognise deferred taxes assets and deferred tax liabilities and explain how they reverse Seminar Questions: Picker et al, Chapter 8 Problem 8.5 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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This note was uploaded on 02/23/2012 for the course ACCT 2311 taught by Professor Shan during the Spring '12 term at Allen University.

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Topic05_SeminarQuestions - Seminar Questions to be covered...

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