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  • IAS 12 Ross LTD Solution

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    This document provides the solutions to practice questions for IAS 12 Income Taxes. It includes: 1) A calculation of current tax expense for Ross Ltd showing the profit before tax and adjustments to arrive at taxable income. The current tax is then calculated at 27%. 2) A deferred tax calculation showing the tax base and carrying value of assets/provisions, the temporary differences, and the resulting deferred tax liability or asset using a rate of 27%. 3) An income tax expense note disclosing the current tax, deferred tax, and foreign tax amounts, and reconciling the tax expense to the profit before tax.

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    Solution to deferred tax questions om Ross ltd

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    IAS 12 Ross Ltd Solution

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    This document provides the solutions to practice questions for IAS 12 Income Taxes. It includes: 1) A calculation of current tax expense for Ross Ltd showing the profit before tax and adjustments to arrive at taxable income. The current tax is then calculated at 27%. 2) A deferred tax calculation showing the tax base and carrying value of assets/provisions, the temporary differences, and the resulting deferred tax liability or asset using a rate of 27%. 3) An income tax expense note disclosing the current tax, deferred tax, and foreign tax amounts, and reconciling the tax expense to the profit before tax.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    1 views2 pages

    IAS 12 Ross LTD Solution

    Uploaded by

    arronyeagar
    This document provides the solutions to practice questions for IAS 12 Income Taxes. It includes: 1) A calculation of current tax expense for Ross Ltd showing the profit before tax and adjustments to arrive at taxable income. The current tax is then calculated at 27%. 2) A deferred tax calculation showing the tax base and carrying value of assets/provisions, the temporary differences, and the resulting deferred tax liability or asset using a rate of 27%. 3) An income tax expense note disclosing the current tax, deferred tax, and foreign tax amounts, and reconciling the tax expense to the profit before tax.

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    © All Rights Reserved
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    FIAC7311 & FIAC7319 Solution to Practice Questions IAS 12

    Ross Ltd Solution


    1. Calculation of current tax expense (as calculated in 3rd year Taxation)
    Profit before tax (1 406 000 + 25 000 profit on sale) 1,431,000
    Exempt differences (76,000)
    Foreign income (138,000)
    Dividends received (25,000)
    Depreciation building 75,000
    Traffic fines 12,000
    Profit after exempt differences 1,355,000
    Temporary differences 19,500
    Depreciation 357,000
    Wear & Tear Plant (430,000)
    Profit on disposal of equipment (25,000)
    Recoupment on disposal of equipment 47,500
    Increase in allowance for credit losses 60,000
    Provision for warranty costs 180,000
    Actual warranty costs (165,000)
    Prepaid insurance 2022 (45,000)
    Prepaid insurance 2021 40,000
    Taxable income 1,374,500

    Current tax @ 27% 371,115

    In FIAC7311 and FIAC7319 the calculation above should be done as follows

    Profit before tax (1 406 000 + 25 000 profit on sale) 1,431,000


    Exempt differences (76,000)
    Foreign income (138,000)
    Dividends received (25,000)
    Depreciation building 75,000
    Traffic fines 12,000
    Profit after exempt differences 1,355,000
    Deductible temporary differences (per DT calculation) 19,500
    Taxable income 1,374,500

    Current tax @ 27% 371,115

    2. Deferred tax calculation


    100% Temporary DTL/(DTA) @
    CV TB
    OR 80% difference 27%

    Administration building 1,275,000 1,500,000 Exempt -


    Manufacturing equipment ①;② 1,489,000 1,412,500 76,500 20,655 DTL
    Allowance for credit losses ③;④ (200,000) (50,000) (150,000) (40,500) DTA
    Provision for warranty costs ⑤ (215,000) - (215,000) (58,050) DTA
    Prepaid insurance ⑥ 45,000 - 45,000 12,150 DTL
    Closing Balance (243,500) (65,745) DTA
    Opening Balance (224,000) (60,480) DTA
    Given (224,000) (62,720) DTA
    Rate adjustment 2,240 DTA
    Deductible temporary difference (CR P/L, DR DT SFP) (19,500) (5,265)

    Prepared by Shan Anderson 1 2023/01/10


    FIAC7311 & FIAC7319 Solution to Practice Questions IAS 12
    Ross Ltd Solution
    ① R1 549 000 – (R150 000 – 90 000) = R1 489 000
    ② R1 450 000 – (150 000 – 112 500) = R1 412 500
    ③ R120 000 + R80 000 = R200 000
    ④ R200 000 x 25% = R50 000
    ⑤ R43 000 000 x 0.5% = R215 000
    ⑥ R90 000 x 6/12 = R45 000

    3. Income tax expense note


    ROSS LIMITED
    NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 April 2023

    Income tax expense


    Major components of tax expense

    SA Normal tax
    Current 372,615
    - Current year 371,115
    - Underprovision prior year (17 500 - 16 000) 1,500

    Deferred (3,025)
    - Movement in temporary differences (5,265)
    - Rate adjustment 2,240

    Foreign tax 30,000

    399,590

    Tax reconciliation
    Profit before tax 1,431,000

    Standard tax @ 28% 386,370


    Exempt differences
    Dividends received (6,750)
    Depreciation building 20,250
    Traffic fines 3,240

    Underprovision prior year 1,500

    Rate adjustment 2,240

    Difference in foreign tax ((138 000 x 27%) = 37 260 – 30 000) (7,260)

    399,590

    Prepared by Shan Anderson 2 2023/01/10

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