Supa-Build (Pty) Ltd is a construction enterprise with a reporting period date of 31 December of each year. Supa-Build (Pty) Ltd has a profit before tax of R1 875 000 and R1 500 000 for the reporting periods ended 31 December 2021 and 31 December 2022 respectively

. Additional information:

1. On 31 December 2022 the balance on the deposits received in advance amounts to R62 500 (2021 R37 500) for construction projects that have not yet commenced. In terms of SARS legislation, these amounts will be taxed in the year they are received. No deposits were received before 1 January 2021

2. Supa-Build (Pty) Ltd replaced its old manufacturing plant on 1 January 2022 and put it into production immediately. The information about the plants are as follows:

new plant old plant

cost price 3 750 000 1 875 000

carrying amount 31 dec 2020 - 1 175000

Tax base 31 dec 2020 - 1 125 000

Decpreciation method straight line straight line

Useful life 5 years 5 years

Residual value(only for acc purposes) 250 000 125 000

Tax wear and tear allowances (yr 1/2/3) 50/25/25 20% p.a

The old plant was sold for 1 000 000

3. The following items were included in calculation of the profit before tax: 2022 2021 Dividend received 62 500 37 500 Fines paid 3 000 - Legal fees paid 30 000 5 000 R25 000 (2021 - Rnil) of the legal fees of 2022 were tax deductible.

4. Assume a standard tax rate for normal company tax for all years as 28%.

5. The balance of the deferred tax account on 31 December 2020 only related to the manufacturing plant.

6. VAT and Dividend Tax may be ignored.

REQUIRED: a) Calculate the deferred tax liability/(asset) of Supa-Build (Pty) Ltd on 31 December 2021 and 2022. (12)

b) Calculate deferred tax expense for the 2021 and 2022 financial years. Hint: first prepare the normal tax payable calculation for Supa-Build (Pty) Ltd for the reporting periods ended 31 December 2021 and 2022. Use the comprehensive approach according to IAS 12 (AC 102) Income taxes. (18)