A company purchases an item of equipment on 1 January 20X1 for £48,000 which it estimates will have a seven-year useful life, at the end of which it is estimated it will be sold for £6,000. The company pays tax at 30% and the tax allowances for the equipment are as follows: LO5

£

20X1 12,000 20X2 9,000 20X3 7,000 20X4 5,000 20X5 4,000 20X6 3,000 20X7 2,000 The company had the same accounting profit before tax for each year of £80,000.

Assume that there are no other non-current assets, and that there are no differences between taxable profit and accounting profit other than those relating to depreciation.

Required:

For each year determine the company’s income tax figure that would be shown in the company’s statement of profit or loss and the deferred tax balance that would be disclosed on the company’s statement of financial position.