SEPT 2017 QUESTION 4 Lalisa Co. has the following carrying amounts and tax based at 31 December 2017: Carrying Amount $'000 Tax Base $'000 Land Building Plant and Equipment 124,000 110,000 35,000 21,000 74,000 53,000 Investments 15,200 10,600 Inventory 5,200 5,200 Trade Receivables A 11,200 Bank 9,510 9,510 Trade Payables 8,900 8,900 10% Loan 15,400 B Provision for warranties 500 0 Provision for deferred tax 1,790 1,790 liability 1 Jan 2017 Revaluation Reserve - Plant and Equipment 25,000 Additional Information: 1. On 31 December 2017, Lalisa revalued some of the plant. Fair value of the plant was $25 million more than the carrying amount. 2. Lalisa recognised allowance for doubtful debts amounting to $0.5 million. Under the taxation legislation, no deduction is allowed until the bad debts have been written off. 3. Lalisa raised a loan during the year and recorded it net of transaction costs amounting to $0.35 million. The transaction costs are allowable for tax in the year in which the loan is raised 4. The company provides for warranties on goods sold but the tax rule only allows it when reimbursements are made. 5. Income tax rate has decreased from 25% 20%. Required: For the year ended 31 December 2017: (a) Determine the amount for A and B. (b) Calculate the deferred tax expense. (c) (c) Prepare the deferred tax account. SEPT 2017 QUESTION 4 Lalisa Co. has the following carrying amounts and tax based at 31 December 2017: Carrying Amount $'000 Tax Base $'000 Land Building Plant and Equipment 124,000 110,000 35,000 21,000 74,000 53,000 Investments 15,200 10,600 Inventory 5,200 5,200 Trade Receivables A 11,200 Bank 9,510 9,510 Trade Payables 8,900 8,900 10% Loan 15,400 B Provision for warranties 500 0 Provision for deferred tax 1,790 1,790 liability 1 Jan 2017 Revaluation Reserve - Plant and Equipment 25,000 Additional Information: 1. On 31 December 2017, Lalisa revalued some of the plant. Fair value of the plant was $25 million more than the carrying amount. 2. Lalisa recognised allowance for doubtful debts amounting to $0.5 million. Under the taxation legislation, no deduction is allowed until the bad debts have been written off. 3. Lalisa raised a loan during the year and recorded it net of transaction costs amounting to $0.35 million. The transaction costs are allowable for tax in the year in which the loan is raised 4. The company provides for warranties on goods sold but the tax rule only allows it when reimbursements are made. 5. Income tax rate has decreased from 25% 20%. Required: For the year ended 31 December 2017: (a) Determine the amount for A and B. (b) Calculate the deferred tax expense. (c) (c) Prepare the deferred tax account.