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On 30 June 2012, an extract of Kendall Ltd’s statement of financial position, prepared for internal purposes but excluding the effect of income tax for the current year, disclosed the following information:
| ASSETS | |
| Bank Inventory Machinery Accumulated Depreciation Deferred Tax Asset |
$40,000 $27409 $400,000 (68,000) $6727 (timing differences only) |
| LIABILITIES | |
| Accounts Payable Provision for Annual Leave Deferred Tax Liability |
$34096 $16512 $3,000 |
ADDITIONAL INFORMATION
The Machinery was acquired on 1 July 2010. Depreciation for accounting purposes was 8.5% (straight line), while 11% (straight line) was used for tax purposes.
The tax rate is 30%.
What is the value of the adjustment to the Deferred Tax Asset for 30 June 2012?
Do not net the Deferred Tax Asset account and the Deferred Tax liability Accounts.
Expert Answer
Solution:
Determining the Value of the Adjustment of Deferred Tax Asset and Deferred Tax Liability for June 30, 2012:
| Carrying Amount | Assessable Amount | Deductible Amount | Tax Base | Taxable Temporary Difference | Deductible Temporary Difference | |
| Assets: | ||||||
| Bank | $40,000 | $0 | $0 | $40,000 | ||
| Inventory | $27,409 | ($27,409) | $27,409 | $27,409 | ||
| Machinery | $400,000 | ($400,000) | $393,273 | $393,273 | $10,000 | |
| Liabilties: | ||||||
| Accounts Payable | $34,096 | $0 | $0 | $34,096 | ||
| Provision for Annual Leave | $16,512 | $0 | ($16,512) | $0 | $16,512 | |
| Deferred Tax Liability | $3,000 | |||||
| Deferred Tax Asset | $4,954 |
