Dragon Lord Bhd recognised a deferred tax liability for the year ended 31 December 2017 which is related solely to a difference between rates of capital allowance and depreciation. The carrying amount of plant and equipment was RM30,000,000 and tax written down value was RM20,000,000. The following transaction took place during 2018: During the year, plant was revalued and surplus was RM6,000,000. At the end of the year, the carrying amount of plant was RM42,000,000 and tax written down was RM25,000,000. Gains on revaluation are taxable on sale at 20%. Development expenditure of RM12,000,000 was capitalised in accordance with MFRS 138 but is deducted for tax purpose. There was no amortisation during the year. Dragon Lord Bhd has recognised income receivable of RM2,000,000 but none has been received yet. Dragon Lord Bhd has made provision for environment clean-up of RM1,000,000. The expenditure will be tax deductible when paid only. The trade receivables were disclosed at RM3,500,000 after providing for doubtful debts of RM250,000. The tax payable for the year was calculated at RM3,300,000. Corporate tax rate for 2017 and 2018 were 24%. REQUIRED: Prepare a table showing the carrying amounts tax base and temporary differences for each of the items as at 31 December 2018. Calculate the amount of tax expense as charged in the Statement of Profit or Loss and Other Comprehensive Income and the amount disclosed in the deferred tax liability in the Statement of Financial Position as at 31 December 2018.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 4MC: Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the...

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Dragon Lord Bhd recognised a deferred tax liability for the year ended 31 December 2017 which is related solely to a difference between rates of capital allowance and depreciation. The carrying amount of plant and equipment was RM30,000,000 and tax written down value was RM20,000,000.

The following transaction took place during 2018:

During the year, plant was revalued and surplus was RM6,000,000. At the end of the year, the carrying amount of plant was RM42,000,000 and tax written down was RM25,000,000. Gains on revaluation are taxable on sale at 20%.
Development expenditure of RM12,000,000 was capitalised in accordance with MFRS 138 but is deducted for tax purpose. There was no amortisation during the year.
Dragon Lord Bhd has recognised income receivable of RM2,000,000 but none has been received yet.
Dragon Lord Bhd has made provision for environment clean-up of RM1,000,000. The expenditure will be tax deductible when paid only.
The trade receivables were disclosed at RM3,500,000 after providing for doubtful debts of RM250,000.
The tax payable for the year was calculated at RM3,300,000.
Corporate tax rate for 2017 and 2018 were 24%.

REQUIRED:

Prepare a table showing the carrying amounts tax base and temporary differences for each of the items as at 31 December 2018.

Calculate the amount of tax expense as charged in the Statement of Profit or Loss and Other Comprehensive Income and the amount disclosed in the deferred tax liability in the Statement of Financial Position as at 31 December 2018.

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