(b) You have just returned from a training on International Accounting Standard 12 (IAS 12) Income Tax. The International Accounting Standard (IAS 12) prescribes the treatment income taxes. It was established that IAS 12 only prescribes the treatment of taxes in the financial books of firms but not the provision of tax rates and their respective computation. Tax rates are normally issued by various countries in consonance with their respective tax legislations. In most countries, the rate changes from year-to-year. In effect, IAS 12 only provides accounting treatment of tax in the preparation of financial statements.

The standard (IAS 10) further stresses on the need to distinguish between a companys tax expense, deferred tax and tax provisions. As a fresh trainee, you have been tasked by your company to perform the following:

a) Compute the total tax expense (4marks)

b) Distinguish between accounting profit and taxable profit; (2 marks)

c) Distinguish between permanent difference and temporary difference (2 marks)

d) The outstanding tax payment at the end of the year 2017 (2 marks)

Below is the statement of comprehensive income prepared by the senior accountant of your firm.

Statement of comprehensive income for the year ended 31/12/2017

GH

Revenue 500,000

Cost of sales 280,000

Gross profit 220,000

Administrative and selling & distribution exp. 130,000

Operating profit 90,000

Investment income 12,000

Profit before interest and tax 102,000

Tax (30% @ 102,000) 10,200

Profit after tax 91,800

Additional information shows the following:

1) The administrative, selling & distribution expenses consist of the following:

GH

General administrative cost 20,000

Staff salaries 40,000

Depreciation of PP&E 16,000

Rental charges of Board members residence 14,000

Sponsorship of CEOs Alumni Dinner 10,000

Penalty charges for late tax payments 5,000

Penalty charges for wrong parking of company cars 3,000

Directors Remuneration 12,000

Auditors fees 10,000

2) The tax authorities in Ghana allows full provision on the properties, plant and equipment