BKAR 3033 FINANCIAL ACCOUNTING AND REPORTING III (A201)

EXAMPLE - DEFERRED TAX

QUESTION 1

The carrying amount and tax base of financial statement items of Berseri Bhd as at 31 December
2019 are as follows:

31 December 2019
Carrying Tax Base
Amount
Property, plant & equipment 30,800 24,500
Research and development 3,000 0
Accounts receivable 2,500 2,800
Inventory 4,000 4,000
Bank 1,500 1,500
Trade payables 3,000 3,000
Accrued interest 500 0
Penalties payable 200 200
10% bank loan 10,000 10,000
Provision for warranties 800 0
Deferred tax liability as at 1 January 900 900

Additional information:

1. The tax rate for the year 2019 is 25%. Assume that the previous year’s tax rate was 30%.

REQUIRED:

Compute the deferred tax expense for the year 2019.

1
ANSWER:

2019

Carrying Tax Base Temporary

Amount Diff.
Property, plant & equipment 30,800 24,500
Research and development 3,000 0
Accounts receivable 2,500 2,800
Inventory 4,000 4,000
Bank 1,500 1,500
Trade payables 3,000 3,000
Accrued interest 500 0
Penalties payable 200 200
10% bank loan 10,000 10,000
Provision for warranties 800 0
Deferred tax liability as at 1 January 900 900

Taxable Temporary Difference (TTD)

Deductible Taxable Difference (DTD)

Tax rate
Ending balance of Deferred Tax Liability
(DTL)
(-) Beginning balance of DTL
(+) (-) Tax rate adjustment

Net deferred tax expense for the year

ended 31 December 2019