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Swiftsure Ltd has carried forward a deferred tax liability of 170000, arising from differences between carrying amount and tax bases of the company's assets
Swiftsure Ltd has carried forward a deferred tax liability of 170000, arising from differences between carrying amount and tax bases of the company's assets. On 30 June 2013, the carrying amounts and tax bases of the company's assets were as follows: Assets A B Carrying amount $142000 $541000 $820000 $86000 Tax base $108000 $340000 $610000 $40000 ? D The current income tax expense for the year ended 30 June 2013 is $8400000 and tax rate is 30%. Required: (a) Prepare general journal entries on 30 June 2013 to record company's income tax expense.
Expert Solution
| Assets | Carrying Amt | Tax Base | Taxable Temporary Difference |
| A | 1,42,000.00 | 1,08,000.00 | 34,000.00 |
| B | 5,41,000.00 | 3,40,000.00 | 2,01,000.00 |
| C | 8,20,000.00 | 6,10,000.00 | 2,10,000.00 |
| D | 86,000.00 | 40,000.00 | 46,000.00 |
| 4,91,000.00 |
Closing Deferred Tax Liability should be = 491000*.3 = 147300
Opening deferred tax liability = 170000
Thus, reversal of deferred tax liability required = 170000 - 147300 = 22700
| Journal entries | ||
| Dr | Cr | |
| Deferred Tax Liability | 22,700.00 | |
| Deferred Tax Income | 22,700.00 | |
| Income Tax expense | 84,00,000.00 | |
| Income tax Liability | 84,00,000.00 |
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