FA – May 2012 – L1 – SA – Q38 – Recording Financial Transactions

Identifying the closing balance to be shown in the company’s statement of financial position from the income tax account.

Question

The Income Tax Account of Wazobia Limited showed a balance of N50,000 on 1 January 2011. Tax paid during the year was N45,000 and the estimated tax based on current year’s account is N60,000

What is the amount to be shown in the company’s statement of financial position as the closing balance from the company’s Income Tax Account?

Answer

N65,000
Explanation:
The balance at the beginning of the year is N50,000, with N45,000 paid during the year and an estimated tax of N60,000 for the current year. The closing balance will be calculated as follows:
N50,000 (opening balance) + N60,000 (current year’s estimated tax) – N45,000 (tax paid) = N65,000.
Therefore, the correct answer is N65,000.

Tags: Financial Position, Income Tax, Tax Accounting
Level: Level 1

Topic: Recording Financial Transactions (Including Source Documents, Books of Prime Entry, and Cash Books)
Series: MAY 2012

Uploader: Theophilus