Question One

A company has accounts receivable of $300 000 and an associated doubtful debts allowance of $60 000. The revenue associated with the accounts receivable of $300 000 has already been included in taxable profit. The doubtful debts will be deductible when the amount is actually written off as bad with a related deduction to accounts receivable.

REQUIRED

1. Assuming that the tax rate is 30 per cent, what is the amount of the temporary difference?
2. Does this give rise to a deferred tax asset or a deferred tax liability, and what is the amount of the deferred tax asset/liability