On 1 January 2008, a company bought plant at a price of $500 000. The

plant was to be depreciated using the straight line method over its

useful life of 5 years (after which it was estimated that it would have no

residual value).

For tax purposes, wear and tear is allowed on the following basis:

50% in the first year

30% in the second year

20% in the third year

On 31 December 2011 the plant was sold for $100 000. The profit before

tax for 2010 was $120 000 and for 2011 $150 000. The tax rate was

30% from 2008 to 2011.

Required

a) Calculate temporary differences and deferred tax asset/ liability for the

years 2008 to 2011, clearly indicating the debits/credits to the deferred

tax account.

b) Calculate the taxable income and current income for 2010 and 2011