Needed At A3M Ltd equipment is depreciated at 25% p.a. straight-line for accounting purposes, but the...

Needed

At A3M Ltd equipment is depreciated at 25% p.a. straight-line for accounting purposes, but the allowable rate for taxation is 20% p.a. The tax rate is 30%.

Equipment costed $640 000 on 1 July 2013. Assuming that no equipment is purchased or sold during the years ended 30 June 2016.

Required

a) the accounting expense and tax deduction for each year ending 2014 to 2018.

b) the impact of depreciation on the calculation of current tax expense for 2017 and 2018.

c) the effect on the deferred tax asset account for 2016, 2017 and 2018.

Expert Solution

Answer:

b) Since the Depreciation as per Tax is Less than Accounting Depreciation so the Taxable income will be more than accounting income. It will increase the current tax in first 4 Years

c) Deferred Tax asset will increase Year on Year from 2014 to 2017 and in the Year 2018 when Accounting Depreciation is zero so in the year 2018 entire deferred tax asset will be reversed

ekkarill92 answered 2 years ago

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