Tollowing assets Carrying amount Tax base Property Plant and equipment 10,000,000 7,000,000 5,000,000 4,000,000 Inventory 2,500,000 4,000,000 Accounts receivable 2,400,000 3,000,000 Liabilities 6,000,000 5,500,000

Tollowing assets Carrying amount Tax base Property Plant and equipment 10,000,000 7,000,000 5,000,000 4,000,000 Inventory 2,500,000 4,000,000 Accounts receivable 2,400,000 3,000,000 Liabilities 6,000,000 5,500,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

1. What amount should be reported as deferred tax asset?
2. What amount should be reported as deferred tax liability?

An entity reported the following assets and liabilities at year-end:
Carrying amount
Tax base
Property
Plant and equipment
10,000,000
7,000,000
5,000,000
4,000,000
Inventory
2,500,000
4,000,000
Accounts receivable
2,400,000
3,000,000
Liabilities
6,000,000
5,500,000
The entity had made a provision for inventory obsolescence of Pl,500,000. Further an
impairment loss against accounts receivable of P600,000 has been made. The tax rate is 30%.

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.

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