Question

A company commenced business on 1 July 2022. On 30 June 2023, an extract of the statement of financial position prepared for internal purposes, but excluding the effect of income tax, disclosed the following information:

Assets		Liabilities
Cash	$20 000	Accounts payable	$50 000
Inventories	60 000	Prevision for annual leave	8 000
Plant	200 000
Accumulated depreciation	(20 000)

Additional information:
The plant was acquired on 1 July 2022. Depreciation for accounting purposes was 10% (straight-line method), while 20% (straight-line) was used for tax purposes.
The tax rate is 30%.

Using the following worksheet, determine the deferred tax asset and deferred tax liability.

	Carrying amount	Future taxable amount	Future deductible amount	Tax base	Taxable temporary differences	Deductible temporary differences
Assets
Cash
Inventories
Plant
Liabilities
Accounts payable
Prov’n annual leave
Deferred tax liability
Deferred tax asset

The deferred tax asset is:

Select one:

a. $2 400.

b. $6 000.

c. $8 000.

d. $20 000.

Answer 1