The finance director of Hyden Ltd is unsure about the deferred tax implications for two of the items in the company’s statement of financial position. Item 1: Hyden Ltd has a balance of $100,000 in its prepaid insurance account. The insurance is deductible when the payment to the insurance is made. Item 2: Hyden Ltd purchased an item of property, plant and equipment (PPE) 5 years ago for $1,000,000. The depreciation expense for accounting purpose is $50,000 per annum, resulting an accumulated depreciation of $250,000 for the year. The taxation office allows this type of PPE to be depreciated at $25,000 per annum. Required: (a) Calculate the deferred tax implication (deferred tax asset or deferred tax liability) for each of the above items, in accordance with IAS 12 / AASB 112 Income Taxes. Assume a tax rate of 30%.
The finance director of Hyden Ltd is unsure about the
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Item 1: |
Hyden Ltd has a balance of $100,000 in its prepaid insurance account. The insurance is deductible when the payment to the insurance is made. |
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Item 2: |
Hyden Ltd purchased an item of property, plant and equipment (PPE) 5 years ago for $1,000,000. The depreciation expense for accounting purpose is $50,000 per annum, resulting an accumulated depreciation of $250,000 for the year. The |
Required:
(a) Calculate the deferred tax implication (
ANSWER HERE:
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Carrying Amount |
Tax |
Taxable Temp Diffs |
Deductible |
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Prepaid insurance |
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PPE |
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