Question
Seal Ltd's balance sheet shows an item of equipment that cost $210,000 and accumulated depreciation of $80,000. The tax base of the equipment is $100,000.
Seal Ltd's balance sheet shows an item of equipment that cost $210,000 and accumulated depreciation of $80,000. The tax base of the equipment is $100,000. Seal Ltd also has accrued expenses of $10,000 that had not been paid, and doubtful debts of $6,000 which will only be allowed as a deduction when the debts are written off as bad. The tax rate is 30%.
What is the balance in the deferred tax account(s) to account for the above transactions?
a) deferred tax liability of $4,800 and deferred tax asset of $9,000 b) deferred tax liability of $9,000 and deferred tax asset of $4,800 c) deferred tax liability of $10,800 and deferred tax asset of $3,000 d) deferred tax liability of $13,800 e) deferred tax asset of $13,800
and why?
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