a. Temporary Differences Of E-Surfboard:
|
Assets/Liabilities |
Accounting Base ($’000) |
Tax Base ($’000) |
Temporary Difference (S’000) |
Comments (Difference) |
|
Assets: |
|
|
|
|
|
Computers (Net) |
240 |
200 |
40 |
Taxable Temporary |
|
Accounts Receivable |
90 |
100 |
10 |
Deductible Temporary |
|
Liabilities: |
||||
|
Provision for warranty costs |
30 |
0 |
30 |
Deductible Temporary |
|
Provision for employee benefits |
20 |
0 |
20 |
Deductible Temporary |
b. Balance Of Deferred Tax liability And Deferred Tax Asset:
|
Calculation of deferred tax asset |
|
|
Particulars |
Amount (in $) |
|
Accounts Receivable |
10,000 |
|
Provision for warranty costs |
30,000 |
|
Provision for employee benefits |
20,000 |
|
Total |
60,000 |
|
Tax rate |
30% |
|
Deferred tax asset value (Debit) |
18,000 |
c. Taxable Income of E-Surfboard:
|
Particulars |
Amount (in S’000) |
|
Profit before tax |
650 |
|
Add: Accumulated depreciation |
60 |
|
Less: Tax depreciation |
(100) |
|
Add: Warranty expense |
90 |
|
Warranty costs paid |
(70) |
|
Add: Employee benefits expense |
10 |
|
Add: Doubtful debts expense |
25 |
|
Less: Bad debts written off |
(15) |
|
Taxable income |
650 |
d. Journal entries for recording current tax and deferred tax:
|
Journal Entry For Current Tax |
|||
|
Date |
Particulars |
Amount (in $) |
Amount (in $) |
|
30-Jun-15 |
Tax Expense Account………..Dr |
1,95,000 |
|
|
To Income Tax Payable Account |
1,95,000 |
||
|
(To realise tax expense pertaining to taxable income) |
In order to pass the journal entry for deferred tax, the following computations have been made:
Calculation Of Temporary Difference:
|
Assets/Liabilities |
Accounting Base ($’000) |
Tax Base ($’000) |
Temporary Difference (S’000) |
Comments (Difference) |
|
Assets: |
||||
|
Computers (Net) |
180 |
100 |
80 |
Taxable Temporary |
|
Accounts Receivable |
100 |
120 |
20 |
Deductible Temporary |
|
Liabilities: |
||||
|
Provision for warranty costs |
50 |
0 |
50 |
Deductible Temporary |
|
Provision for employee benefits |
30 |
0 |
30 |
Deductible Temporary |
|
Calculation of deferred tax asset |
|
|
Particulars |
Amount (in $) |
|
Accounts Receivable |
20,000 |
|
Provision for warranty costs |
50,000 |
|
Provision for employee benefits |
30,000 |
|
Total |
1,00,000 |
|
Tax rate |
30% |
|
Deferred Tax Asset Value (Debit) |
30,000 |
|
Less: Amount realised in 2014 |
18,000 |
|
Adjustment needed |
12,000 |
|
Calculation Of Deferred Tax Liability |
|
|
Particulars |
Amount (in $) |
|
Computers (Net) |
80,000 |
|
Tax rate |
30% |
|
Deferred tax liability value (Credit) |
24,000 |
|
Less: Amount realised in 2014 |
12,000 |
|
Adjustment needed |
12,000 |
|
Journal Entry For Deferred Tax |
|||
|
Date |
Particulars |
Amount (in $) |
Amount (in $) |
|
30-Jun-15 |
Deferred Tax Asset Account………..Dr |
12,000 |
|
|
To Deferred Tax Liability Account |
12,000 |
||
|
(To realise deferred tax as at 30 June 2015) |
Gaertner, F. B., Laplante, S. K., & Lynch, D. (2016). Trends in the sources of permanent and temporary book-tax differences during the Schedule M-3 era.
Gao, Z., Givoly, D., & Laux, R. (2015). On the valuation of tax expense.
Hanlon, D., Navissi, F., & Soepriyanto, G. (2014). The value relevance of deferred tax attributed to asset revaluations. Journal of Contemporary Accounting & Economics, 10(2), 87-99.
Laux, R. C. (2013). The association between deferred tax assets and liabilities and future tax payments. The Accounting Review, 88(4), 1357-1383.
Small, R., Yasseen, Y., & Jansen, J. (2016). Accounting for deferred taxation: accounting technical. Professional Accountant, 2016(27), 14-16.
Wahab, N. S. A., & Holland, K. (2015). The persistence of book-tax differences. The British Accounting Review, 47(4), 339-350.
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