- 5 Marks
CR – May 2018 – L3 – Q2e – IAS 12: Income Taxes
Explain how to account for deferred tax arising from revaluation of land.
Question
On 1 October 2016, Abudu Ltd decided to revalue its land for the first time. The land was originally purchased six years ago for GH¢65,000 and was revalued to its current market value of GH¢80,000 on 1 October 2016. The difference between Abudu Ltd’s net assets (including revaluation of land) and the lower tax base at 30 September 2017 was GH¢27,000. The opening deferred tax liability at 1 October 2016 was GH¢2,600, and Abudu Ltd’s tax rate is 25%.
Required:
Explain how to account for the above transaction in the financial statements of Abudu Ltd for the year to 30 September 2017. (5 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Deferred Tax, Financial Statements, IAS 12, Income tax expense, Revaluation
- Level: Level 3
- Topic: IAS 12: Income taxes
- Series: MAY 2018
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