Chapter 6 - Solutions to Gripping IFRS : Graded Questions...

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Solutions to Gripping IFRS : Graded Questions Taxation and deferred taxation Chapter 6: Page 1 Solution 6.1 a) Calculations Current taxation (and deferred taxation adjustment) 30% Accounting profit 100 000 Permanent differences: - capital profits (exempt income) (50 000) + donations (non-deductible expenses) 30 000 Taxable accounting profits 80 000 24 000 Dr Tax expense Temporary differences: - expenses prepaid closing balance (40 000) 12 000 Cr Deferred tax Taxable income 40 000 12 000 Cr CTP Deferred taxation calculation (Balance sheet approach) Carrying Tax Temporary Deferred Balance/ amount base difference tax adjustment Balance: 1 March 20X0 0 0 0 0 Adjustment (12 000) dr TE; cr DTL Balance: 28 February 20X1 40 000 0 (40 000) (12 000) L b) Ledger-accounts Taxation Current tax payable/ receivable Description C Description C Description C Description C Current tax payable/ receivable 12 000 Taxation 12 000 Deferred tax 12 000 24 000 Balance c/d 12 000 24 000 24 000 12 000 12 000 Balance b/d 12 000 Deferred tax Description C Description C Taxation 12 000 Balance c/d 12 000 12 000 12 000 Balance b/d 12 000
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Solutions to Gripping IFRS : Graded Questions Taxation and deferred taxation Chapter 6: Page 2 Solution 6.1 continued … c) Disclosure LOOK LIMITED EXTRACT FROM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 28 FEBRUARY 20X1 20X1 C 3. Taxation Normal tax Current tax 12 000 Deferred tax 12 000 Income tax expense 24 000 Tax rate reconciliation: C % Tax effects of: Profit before tax / applicable rate (100 000 x 30%) 30 000 30 Exempt capital profits (50 000 x 30%) (15 000) (15) Non-deductible expenses (30 000 x 30%) 9 000 9 Income tax expense / effective rate 24 000 24 d) Journals GENERAL JOURNAL Debit Credit Tax expense 12 000 Current tax payable: normal tax 12 000 Current normal taxation estimated for 20X1 Tax expense 12 000 Deferred taxation: normal tax 12 000 Deferred normal taxation estimated for 20X1 e) Statement of comprehensive income disclosure LOOK LIMITED EXTRACT FROM STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 20X1 Note 20X1 C Profit before tax 100 000 Income tax expense 3 (24 000) Profit for the period 76 000 Other comprehensive income - Total comprehensive income 76 000
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Solutions to Gripping IFRS : Graded Questions Taxation and deferred taxation Chapter 6: Page 3 Solution 6.1 continued … f) Statement of financial position disclosure LOOK LIMITED EXTRACTS FROM STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 20X1 Note 20X1 EQUITY AND LIABILITIES C Non-current liabilities Deferred taxation 12 000 Current liabilities Current tax payable: Normal taxation 12 000
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Solutions to Gripping IFRS : Graded Questions Taxation and deferred taxation Chapter 6: Page 4 Solution 6.2 a) Journals Debit Credit 20X7 Tax expense 100 000 Current tax payable: normal tax 100 000
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Chapter 6 - Solutions to Gripping IFRS : Graded Questions...

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