Question

Bowe Ltd is a reporting entity and complies with AASB 112 ‘Income Taxes'. Bowe maintains separate accounts for any deferred tax assets or deferred tax liabilities (i.e. does not offset deferred tax assets and deferred tax liabilities). Bowe’s accounting records for the year ended 30 June 2020 disclose the following:

Revenue	$1,200,000
Cost of goods sold	300,000
SG&A expenses	100,000
Capital expenditure (not allowed for tax deduction)	200,000
Deductible temporary difference, 30 June 2020	50,000
Taxable temporary difference, 30 June 2020	80,000
Deductible temporary difference, 30 June 2019	50,000
Taxable temporary difference, 30 June 2019	30,000
Tax rate	20%
Total tax base of assets	1,000,000
Total tax base of liabilities	800,000

REQUIRED:

Calculate deferred tax expense for the year ended 30 June 2020. Your answers must comply with AASB 112 ‘Income Taxes’. Show all necessary working, explanations and assumptions to support your answer.

Answer 1

Temporary Diffrences are diffrence between Carrying amount an asset or Liablity in the balance sheet and its tax base
So Temporary Difference	=	$1000000-800000
	=	$200000
Defered Tax Liablities are the amounts of income taxes payable in future periods in respective of taxable temporary diffrences

Taxable Temporary Diffrence 30 june 2019	=	$30000
Tax rate	20%
Defered Tax Liablity	=	$30000*20%
	=	$6000
Taxable Temporary Diffrence 30 june 2020	=	$80000
Tax rate	20%
Defered Tax Liablity	=	$80000*20%
	=	$16000
Total Defered Tax Liablity	=	$6000+$16000
	=	$22000

Recognition of current Tax Liablities and Tax assets
Current tax for current and prior periods shall,to the extent unpaid,be recognised as liablity.
If the amount already paid in respect of current and prior periods exceeds the amount due for those periods ,the excess
shall be recognised as an asset

Note : I am assuming previous year 2019 taxes are not paid and not considered deductable temporary diffrence

Defered Tax Assets are the amounts of income taxe recoverable in future periods in respective of deductible temporary diffrences
Deductible Temporary Diffrence 30 june 2019	=	$50000
Tax rate	20%
Defered Tax Asset	=	$50000*20%
	=	$10000
Deductible Temporary Diffrence 30 june 2020	=	$50000
Tax rate	20%
Defered Tax Asset	=	$50000*20%
	=	$10000
Total Defered Tax assets	=	$10000+$10000
	=	$20000