A non-current asset costing €2,000 was acquired at the start of year 1. It is being depreciated straight line over four years, resulting in annual depreciation charges of €500. Thus a total of €2,000 of depreciation is being charged. The income tax rate is 25%. The capital allowances (=’tax depreciations’) granted on this asset are: Year 1 €800 Year 2 €600 Year 3 €360 Year 4 €240 Assume that the pretax accounting income is €10.000 each of the following four years. Required: Calculate the deferred tax account, assuming: 1. Data as presented above 2. Data as above but asset is being revalued at the end of year 2 by €1.500. 3. Data as above but the asset is being impaired at the end of year 2 by €800
A non-current asset costing €2,000 was acquired at the start of year 1. It is being depreciated straight line over four years, resulting in annual depreciation charges of €500. Thus a total of €2,000 of depreciation is being charged. The income tax rate is 25%. The capital allowances (=’tax depreciations’) granted on this asset are: Year 1 €800 Year 2 €600 Year 3 €360 Year 4 €240 Assume that the pretax accounting income is €10.000 each of the following four years. Required: Calculate the deferred tax account, assuming: 1. Data as presented above 2. Data as above but asset is being revalued at the end of year 2 by €1.500. 3. Data as above but the asset is being impaired at the end of year 2 by €800
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A non-current asset costing €2,000 was acquired at the start of year 1. It is being
straight line over four years, resulting in annual depreciation charges of €500. Thus a total of
€2,000 of depreciation is being charged. The income tax rate is 25%. The capital allowances
(=’tax depreciations’) granted on this asset are:
Year 1 €800
Year 2 €600
Year 3 €360
Year 4 €240
Assume that the pretax accounting income is €10.000 each of the following four years.
Required: Calculate the
1.
Data as presented above
2.
Data as above but asset is being revalued at the end of year 2 by €1.500.
3.
Data as above but the asset is being impaired at the end of year 2 by €800
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education