- 15 Marks
FR – Nov 2019 – L2 – Q2b – Accounting for Income Taxes (IAS 12)
Calculate current and deferred tax for Dan Ruwa Nigeria Limited and prepare the statement of profit or loss.
Question
b. Dan Ruwa Nigeria Limited is a company that specializes in the production of bottled and sachet water. The company was incorporated on January 1, 2018.
The summarised financial statements of the company for the year ended December 31, 2018, are as follows:
Extract of Statement of Profit or Loss for the year ended December 31, 2018:
| Description | N’000 |
|---|---|
| Revenue | 270,000 |
| Administrative and other allowable expenses | (138,000) |
| Accounting depreciation | (11,000) |
| Net profit before taxation | 121,000 |
Extract of Statement of Financial Position as at December 31, 2018:
| Description | N’000 |
|---|---|
| Property, plant & equipment | 48,000 |
| Motor vehicle | 12,000 |
| Less: Depreciation | (11,000) |
| Carrying amount | 49,000 |
| Description | N’000 |
|---|---|
| Ordinary share capital | 17,000 |
| Retained earnings | 12,000 |
| Other liabilities | 20,000 |
| Total | 49,000 |
The Federal Inland Revenue Service (FIRS) granted the company a capital allowance on its non-current assets, which amounted to N15,000,000, and the company income tax rate is 30%.
Required:
i. Calculate the current income tax expense and the deferred tax liability balance that should be disclosed in the statement of financial position of the company as at December 31, 2018.
(10 Marks)
ii. Prepare the statement of profit or loss of Dan Ruwa Nigeria Limited showing the tax expense for the year ended December 31, 2018.
(5 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Capital allowances, Current Tax, Deferred Tax, IAS 12, Income Tax Calculation
- Level: Level 2
- Topic: Accounting for Income Taxes (IAS 12)
- Series: NOV 2019