Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent.Required: SHOW YOUR WORKINGSDetermine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability?ANSWER i): What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?

Deffered Tax Liability: When asset's carrying value exceeds its tax base it is taxable temporary…

Answered: Determine whether the depreciation of…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent.

Required: SHOW YOUR WORKINGS