JANUARY 2018 QUESTION 4 Kaido Co. has the following carrying amounts and tax based at 31...

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JANUARY 2018 QUESTION 4 Kaido Co. has the following carrying amounts and tax based at 31 December 2017: Carrying Amount $'000 Tax Base $'000 Inventory Property Plant and Equipment Investments Trade Receivables 15,000 12,000 8,000 8,800 7,000 6,500 8,800 8,800 3,500 A (note 1) Rental Receivables Bank 2,000 B (note 2) 2,700 2,700 Trade Payables 2,600 2,600 Other payables 2,500 1,500 10% Loan 2,000 2,000 Provision for warranties 180 Deferred tax liability 1 Jan 450 450 2017 Ordinary share capital 10,000 Revaluation Reserve - 3,000 Property Retained earnings 26,270 Additional Information: 1. Kaido Co. recognised allowance for doubtful debts amounting to $0.25 million. Under the taxation legislation, no deduction is allowed until the bad debts have been written off. 2. During the year, Kaido Co. recognised rental receivable of $2 million that has been earned. However, rental income is only taxable upon receipt. 3. The company provides for warranties on goods sold of $180,000. However, the tax rules only allow cash spent on actual repairs. 4. Income tax rate has decreased from 25% to 20%. Required: For the year ended 31 December 2017: (a) Determine the amount for A, B and C. (1.5 marks) (b) Calculate the deferred tax expense. (6 marks) (c) Prepare the deferred tax account. (2.5 marks) [Total: 10 marks] JANUARY 2018 QUESTION 4 Kaido Co. has the following carrying amounts and tax based at 31 December 2017: Carrying Amount $'000 Tax Base $'000 Inventory Property Plant and Equipment Investments Trade Receivables 15,000 12,000 8,000 8,800 7,000 6,500 8,800 8,800 3,500 A (note 1) Rental Receivables Bank 2,000 B (note 2) 2,700 2,700 Trade Payables 2,600 2,600 Other payables 2,500 1,500 10% Loan 2,000 2,000 Provision for warranties 180 Deferred tax liability 1 Jan 450 450 2017 Ordinary share capital 10,000 Revaluation Reserve - 3,000 Property Retained earnings 26,270 Additional Information: 1. Kaido Co. recognised allowance for doubtful debts amounting to $0.25 million. Under the taxation legislation, no deduction is allowed until the bad debts have been written off. 2. During the year, Kaido Co. recognised rental receivable of $2 million that has been earned. However, rental income is only taxable upon receipt. 3. The company provides for warranties on goods sold of $180,000. However, the tax rules only allow cash spent on actual repairs. 4. Income tax rate has decreased from 25% to 20%. Required: For the year ended 31 December 2017: (a) Determine the amount for A, B and C. (1.5 marks) (b) Calculate the deferred tax expense. (6 marks) (c) Prepare the deferred tax account. (2.5 marks) [Total: 10 marks]