For the year ended 30 June 20X4, Margorie Corp generated taxable operating income of CU 1,200,000 of which the income tax rate was payable was 30%. A transfer of CU 20,000 will be made to the deferred tax liability account. The initial balance of this deferred tax liability was CU 100,000 before making this transfer adjustment. The estimated tax on profits for the year ended 30 June 20X3 is CU 80,000, but the tax has been corrected and is now determined to be CU 84,000 and is fully paid. Income tax on profits for the year to 30 June 20X4 is paid on 1 September 20X5. In years up to 30 June 20X4 the company earned a "capital gain" of CU 60,000 from the sale of several properties. Profits on these "capital gains" are taxed at a rate of 30%. Questions: Compute the tax expense and for the year ended 30 June 20X4 and the deferred tax liability as of 30 June 20X4. Various difficulties have been experienced by the business world due to the Covid-19 pandemic, such as the implementation of the Lockdown. In addition, in March 2020, the government announced a reduction in the income tax rate from 25% to 22% for the 2020 financial year. How is the main issue in this situation regarding the measurement of deferred tax assets / liabilities for financial statements for the period January 1 to June 30, 2020? (Explain briefly with the exact reasons for at least two main issues).

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter3: Taxes On The Financial Statements

Section: Chapter Questions

Problem 4BCRQ

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For the year ended 30 June 20X4, Margorie Corp generated taxable operating income of CU 1,200,000 of which the income tax rate was payable was 30%. A transfer of CU 20,000 will be made to the deferred tax liability account. The initial balance of this deferred tax liability was CU 100,000 before making this transfer adjustment. The estimated tax on profits for the year ended 30 June 20X3 is CU 80,000, but the tax has been corrected and is now determined to be CU 84,000 and is fully paid. Income tax on profits for the year to 30 June 20X4 is paid on 1 September 20X5. In years up to 30 June 20X4 the company earned a "capital gain" of CU 60,000 from the sale of several properties. Profits on these "capital gains" are taxed at a rate of 30%.

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Compute the tax expense and for the year ended 30 June 20X4 and the deferred tax liability as of 30 June 20X4.
Various difficulties have been experienced by the business world due to the Covid-19 pandemic, such as the implementation of the Lockdown. In addition, in March 2020, the government announced a reduction in the income tax rate from 25% to 22% for the 2020 financial year. How is the main issue in this situation regarding the measurement of deferred tax assets / liabilities for financial statements for the period January 1 to June 30, 2020? (Explain briefly with the exact reasons for at least two main issues).

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