Rockford Plc prepares financial statements to 31 December each year. On 1 January 2020 Rockford plc purchases plant and machinery for £2,400,000 which has a useful life of 8 years with no residual value. The tax authorities do not allow depreciation as a deductible expense. Instead, the tax authority gives capital allowances each year at a rate of 20% on the tax written down value each year. The corporation tax rate is 22%. Rockford Plc has estimated that its current tax liability for the year ended 31 December 2021 is £106,000. Calculate the amount of deferred taxation to be shown in the statement of financial position as at 31 December 2020 and as at 31 December 2021, and show the Statement of Financial Position extracts for 2020 and 2021.
Rockford Plc prepares financial statements to 31 December each year. On 1 January 2020 Rockford plc purchases plant and machinery for £2,400,000 which has a useful life of 8 years with no residual value. The tax authorities do not allow depreciation as a deductible expense. Instead, the tax authority gives capital allowances each year at a rate of 20% on the tax written down value each year. The corporation tax rate is 22%. Rockford Plc has estimated that its current tax liability for the year ended 31 December 2021 is £106,000. Calculate the amount of deferred taxation to be shown in the statement of financial position as at 31 December 2020 and as at 31 December 2021, and show the Statement of Financial Position extracts for 2020 and 2021.
Chapter7: Losses—deductions And Limitations
Section: Chapter Questions
Problem 70IIP
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Transcribed Image Text:Rockford Plc prepares financial statements to 31 December each year.
On 1 January 2020 Rockford plc purchases plant and machinery for
£2,400,000 which has a useful life of 8 years with no residual value. The
tax authorities do not allow depreciation as a deductible expense.
Instead, the tax authority gives capital allowances each year at a rate of
20% on the tax written down value each year. The corporation tax rate is
22%.
Rockford Plc has estimated that its current tax liability for the year
ended 31 December 2021 is £106,000.
Calculate the amount of deferred taxation to be shown in the statement
of financial position as at 31 December 2020 and as at 31 December
2021, and show the Statement of Financial Position extracts for 2020
and 2021.
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