Chapter 19, Problem 3P

To determine

Chapter 19- P-19-3

Deferred tax asset: The process of paying over and above the required level of tax is termed as deferred tax asset. These taxes are calculated and paid on the future expected income. In case if the future expected inflow of cash reduces then the company can claim the excess tax paid in the form of tax relief or refund.

Deferred tax liability: Some business activities may create dissimilarity in the amount recorded in the books and the taxable income. Those differences create deferred tax liability. For example, Mr.J is a car dealer who sold a car on installment. In actual the sale happened in the current year but the benefits are receivable in the future years. This creates a difference in the books of accounts and the taxable account.

• (a)

To compute the Income tax payable for the year 2018.

To determine

• (b)

To compute the Income tax payable for the year 2018.

To determine

• (c)

To prepare: To prepare the Income statement and compute the net income for the year.

To determine

• (d)

To prepare: The deferred income tax is recorded in the balance sheet.