Deferred tax liability brought forward and PPE timing difference.

Calculate the current and deferred tax liabilities for Metalwise plc for the year ended 31 December 2020. Set out the journals to adjust the statement of comprehensive income and the statement of financial position.

At 1 January 2020, the deferred tax liability is recognised at 16 million in the statement of financial position and no adjustments have been made to this figure in the draft financial statements at 31 December 2020. The deferred tax liability arises solely in relation to the difference between the carrying amount of plant and machinery and its tax base. The carrying amount of this plant and machinery on 1 January 2020 was 95 million, and its tax base was 15 million. Depreciation is disallowed for tax purposes and a claim for tax depreciation is made each year in calculating the current tax liability for the company. There were no additions or disposals of plant and machinery. On 30 September 2020 Metalwise paid the current tax liability it owed for the year ended 31 December 2019. The balance on the current tax liability on the statement of financial position at 31 December 2020 represents an over provision in respect of the year ended 31 December 2019. I have not calculated the current tax or the deferred tax movement for the year ended 31 December 2020. Additional information The depreciation charge on PPE for the year ended 31 December 2020 was 20 million. This charge included 3 million depreciation on a building. No tax depreciation is available for buildings but Metalwise can claim 8 million tax depreciation for PPE for the year ended 31 December 2020. On 1 April 2020, Metalwise bought the rights to a metal alloy process, an intangible asset. The carrying amount of this intangible asset is included on the statement of financial position at 31 December 2020 at 10 million. The intangible cost 10 million. Amortisation will commence on 1 January 2021 therefore no amortisation has been included in the statement of profit or loss for the year ended 31 December 2020. This is the correct financial reporting treatment for this asset. The tax treatment for intangibles in the tax jurisdiction where Metalwise operates permits a full tax deduction for the full cost of the intangible asset in the year that it is purchased. For all other income and expenses the treatment for accounting profit and taxable profit are the same except for those differences identified above. The tax rate is 20%

Within the company's asset there is a plot of land revalued at 31 December 2020 to 30 billion, the cost of the land included in the PPE on the statement of financial position at 3 December 2020 is 18 million. In the tax jurisdiction where Metalwise operates, gains on land are taxed when the land is sold in a future period.

Statement of profit or loss for the year ended 31 December 2020 Revised 000 000 617,000 -450,000 167,000 -120,761 Revenue Cost of sales Gross profit Operating expenses Operating profit Finance costs Profit before tax Income tax expense (To be completed) Profit for the year OCI Total comprehensive income 46,239 -6,500 39,739 39,739 39,739 Statement of financial position at 31 December 2020 ASSETS Non-current 000 000 assets revised Property, plant and 100,000 equipment Intangible 10,000 Investment 8,000 118,000 Current assets Inventories 93,062 Trade receivables 35,035 Financial asset 50 Cash and cash 8,322 equivalents 133,469 Total assets 254,469 EQUITY AND LIABILITIES Share capital and 100,000 share premium Retained earnings 65,339 Other reserves 165,339 Long-term liabilities Bank borrowings 35,010 Deferred tax - Balance at 1 16,000 January 2020 51,010 Current liabilities Trade and other 38,020 payables Current tax 100 payable 38,120 Total equity and 254,469 Statement of profit or loss for the year ended 31 December 2020 Revised 000 000 617,000 -450,000 167,000 -120,761 Revenue Cost of sales Gross profit Operating expenses Operating profit Finance costs Profit before tax Income tax expense (To be completed) Profit for the year OCI Total comprehensive income 46,239 -6,500 39,739 39,739 39,739 Statement of financial position at 31 December 2020 ASSETS Non-current 000 000 assets revised Property, plant and 100,000 equipment Intangible 10,000 Investment 8,000 118,000 Current assets Inventories 93,062 Trade receivables 35,035 Financial asset 50 Cash and cash 8,322 equivalents 133,469 Total assets 254,469 EQUITY AND LIABILITIES Share capital and 100,000 share premium Retained earnings 65,339 Other reserves 165,339 Long-term liabilities Bank borrowings 35,010 Deferred tax - Balance at 1 16,000 January 2020 51,010 Current liabilities Trade and other 38,020 payables Current tax 100 payable 38,120 Total equity and 254,469