Tax Base – NBC Institute

FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)

Calculate the deferred tax charge/credit for Lawmarg Nigeria Limited and the deferred tax balance in the statement of financial position.

Question

Lawmarg Nigeria Limited purchased an item of plant for N2,000,000 on October 1, 2014. It had an estimated life of eight years and an estimated residual value of N400,000. The plant is depreciated on a straight-line basis. The tax authorities do not allow depreciation as a deductible expense. Instead, an initial capital allowance of 40% of the cost of this type of asset can be claimed against income tax, and 20% per annum (on a reducing balance basis) of its tax base thereafter. The rate of income tax is 30%.

Required: In respect of the above item of plant, calculate the deferred tax charge/credit in Lawmarg Nigeria Limited’s statement of profit or loss for the year ended December 31, 2017, and the deferred tax balance in the statement of financial position at that date.

Answer

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Tags: Deferred Tax, Depreciation, IAS 12, Income Taxes, Tax Base, Temporary Differences
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: MAY 2018

FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications

Calculation of deferred tax liability considering temporary differences in various assets and liabilities, including tax base and carrying values.

Question

The Financial Accountant of Abodie Ltd is finalising the financial statements of Abodie Ltd for the year ended 31 August 2021. The following items are being considered for deferred tax purposes:

At year end, Abodie Ltd’s property, plant & equipment had a tax base and carrying value of GH¢72 million and GH¢95 million, respectively.
The company’s provision for decontamination costs was GH¢11 million (appropriately discounted) at the year end. Decontamination costs are tax deductible when paid.
The company had inventory with a carrying value of GH¢24 million. This did not agree with the tax base because of a GH¢3 million write-down for obsolete items. Tax relief is only granted for inventories upon sale.
The company incurred GH¢15 million in respect of new software development during the year, which was capitalised and will be amortised over the next 5 years. Full year’s charge is required in the first year of completion or purchase. This cost was deducted in the current year for tax purposes. The company is liable for income tax at 30%.

Required:

Compute the company’s deferred tax liability at 31 December 2021.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Deferred Tax, Inventory Write-down, Property, software development, Tax Base, Temporary Differences
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAR 2023

FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)

Calculate the deferred tax charge/credit for Lawmarg Nigeria Limited and the deferred tax balance in the statement of financial position.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Deferred Tax, Depreciation, IAS 12, Income Taxes, Tax Base, Temporary Differences
Level: Level 2

Topic: Accounting for Income Taxes (IAS 12)
Series: MAY 2018

FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications

Calculation of deferred tax liability considering temporary differences in various assets and liabilities, including tax base and carrying values.

Question

The Financial Accountant of Abodie Ltd is finalising the financial statements of Abodie Ltd for the year ended 31 August 2021. The following items are being considered for deferred tax purposes:

At year end, Abodie Ltd’s property, plant & equipment had a tax base and carrying value of GH¢72 million and GH¢95 million, respectively.
The company’s provision for decontamination costs was GH¢11 million (appropriately discounted) at the year end. Decontamination costs are tax deductible when paid.
The company had inventory with a carrying value of GH¢24 million. This did not agree with the tax base because of a GH¢3 million write-down for obsolete items. Tax relief is only granted for inventories upon sale.
The company incurred GH¢15 million in respect of new software development during the year, which was capitalised and will be amortised over the next 5 years. Full year’s charge is required in the first year of completion or purchase. This cost was deducted in the current year for tax purposes. The company is liable for income tax at 30%.

Required:

Compute the company’s deferred tax liability at 31 December 2021.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Deferred Tax, Inventory Write-down, Property, software development, Tax Base, Temporary Differences
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAR 2023

Question Tag: Tax Base

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FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)

Calculate the deferred tax charge/credit for Lawmarg Nigeria Limited and the deferred tax balance in the statement of financial position.

FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications

Calculation of deferred tax liability considering temporary differences in various assets and liabilities, including tax base and carrying values.

FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)

Calculate the deferred tax charge/credit for Lawmarg Nigeria Limited and the deferred tax balance in the statement of financial position.

FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications

Calculation of deferred tax liability considering temporary differences in various assets and liabilities, including tax base and carrying values.

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FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)

Calculate the deferred tax charge/credit for Lawmarg Nigeria Limited and the deferred tax balance in the statement of financial position.

You're reporting an error for "FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)"

FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications

Calculation of deferred tax liability considering temporary differences in various assets and liabilities, including tax base and carrying values.

You're reporting an error for "FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications"

FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)

Calculate the deferred tax charge/credit for Lawmarg Nigeria Limited and the deferred tax balance in the statement of financial position.

You're reporting an error for "FR – May 2018 – L2 – Q6b – Accounting for Income Taxes (IAS 12)"

FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications

Calculation of deferred tax liability considering temporary differences in various assets and liabilities, including tax base and carrying values.

You're reporting an error for "FR – Mar 2023 – L2 – Q2c – Financial Reporting Standards and Their Applications"

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