SUGGE$"r"it,i $OLUTION

FRS 112 lncome taxes

Question 1 (FAR500, Mar 2005, extract)

B (i)

Yes,ifthereisalegal rightofoffseibetweencurrenttaxassetanderr,, :tax

liab.OR where the DT assets and DT liab. are related to income tax sarne tax authority on the same taxable entity or different entities.

ie'

by the

(ii) DT assets and DT liabiities should be presented separately from ott.le,i :,*ts and liabilities. They should not be classified as cunent assets or currrri rbilities
Question 2 (FAR 500, Oct 2008, extract)

i.

Deferred Tax a. The tax base is RM85,000.

b. The tax base would be RM350 as fines and penalties

are

nr":r

ibie

c.
d.

Tax base is nil because it taxed on a cash basis.

Computation of deferred tax Carrying amount 8,000 (800) 7.200 Tax base 8,000 (2,000) 6.000
cj

lax

Cost Less depn/ Cap. allowance

'l1a/o

itr

Question 3 (April 2Ai1)

{a} Determination of TTD/DTD

items
Equipment Bank Loan Accrued lnterest Research & Development Costs Accounts Receivable (3,500 + 350) Provision for doubtful debts Prepaid travellinq expenses Provision for warranties Accrued fines & oenalties TOTAL

Carrying value
40,000 10,000 500 3,000 3,850 350 200 770 100

Tax base 23,200 10,000

0 0

TTD
1

t;,

I'

3,850
0

20a
0

100
,g

@c

SUGGESTED SOLUTION

tleterred tax lta items

TOTAL Tax Rate = 260/o Deferred Tax liabilitv Deferred tax Assets

assets Carrying value

Tax base
TTD 19,800 5,148 421 2A DTD

1,620

'{c) Deferred tax liability account

lS: Restatemeni
(4o/o

RM 444

RM

x 1 1,000)
4.727 5,167

Balance c/d

Balance b/d i11.000 x 30%) lncome statement

3,300
1.867

5,167

Question 4 (FAR 500, Apr

2OOB, extract)

c.

Taxable temporary difference (TTD) and deductible temporary difference (DTD)

Carrying Tax Value Based

Property, plant and equipment Development exp. Account Receivable

TTD
3.600 4,000

DTD

RM'000 RM'000 RM'000

32p00 28100 4,000 7,000 3,600 4,800 4,000 0*

7,000 3,600 4,800 4,000 15,000
NIL*

RM'000

lnventory Bank Trade Payables Lease Payable Accrued expenses Penalties Payable Provn for Warranties Provn for doubtful debts Deferred Tax Payable
1.1.2007 Retained Profits Share Capital

15,000

500 2OO 1,000 500 900

500

0* 0

1,000 500

900 3,900 20,000

20,000

9,300

7,600

2,000

Refer to workings

SUGGESTED SOLUTION

Workings: Calculation of tax base Development Cost Capital allowance Tax base

expenditure

RM'000 4,000 4,000 0

Penalties pavable * not allowed for taxation Provision for Warranties Cost Amount deductible for future Tax base

permanent difference

taxation

RM'000 1,000 1.000

0

Question 5 (Jan 2012)

(a) Schedule of temporary differences

Item

Carrying amount
RM

Tax Base
RM

(rrD)
RM

{DrD)
RM

Quick Design
20109/09 Cost

550,000 (165,000)

550,000

Accumulated depreciation (1Oo/o x 3 yrs) lnitial allowance (10%) Annual allowance (20o/o x 3 vrs)

31nA11 Carrying
Creative Desiqn

amount I Tax base

i

(s5,000) (330,000)
ggS,OOO

165,000

zz0.0o0

15/06/10 Cost Accumulated depreciation (10o/o x 2 vrs) lnitial allowance (10%) Annual allowance (2Oo/o x 2 vrs) 31t1A11 Carrying amount Tax base Development cost Account receivable Provision for doubtful debt Provision for warranties TOTAL

300,000 (60,000)

300,000

(30,000) (120,000) 240,000 150,000 90.000 75,000 10,000 13,000 90,000 90,000 75 000
0 0

10,000 13,000

400,000

23,000

SUGGESTED SOLUTION

(b)

Deferred tax liability/asset computation

Net temporary differences = 400,000 - 23,000 = 377,OOA (TTD) Defened Tax Liability = 377,OO0 x 30 % = RM113,100

{c)

Tax expense

Deferredtaxexpense = 113,100-111,600
= RM1,500
Current tax

expense

= (120,000 x 30%) = 36,000 - 1,500 = 34,500

- 't,500

Question 6 (April 2010)

a)

For year ended 3111212008

Machine M/Vehicle RM RM
30,000 18,000

Retirement Benefits
RM

Carrying Amt Cost (1/1/08) -Accum Depre

20%x60kx3y
20%x30kx3y

60,000
36,000

cA (31/12108)
Tax Base:

24,OOO 12,000 60,000

(24,AOA)

4,000

Cost

-Accum Cap

All (40olox60,000)
25clcx30kx3y

30,000

(20%x60,000x2y) (24,000)

Tax base Temp. diff

12,000

12,000

22504

4,500

7,500

4,000

Deferred tax liability

TTD
RM
12,OOO

DTD
RM
4,000

Net TD
RM

Machine M/Vehicles Retirement Benefit Liability

4,500

16,500

4,000

12,500

Tax rate Deferred tax liability

z\

16"/o

3,250

SUGGESTED SOLUTION

For year ended 31112/2OOg

Machine
RM

MA/ehicle
RM

Retirement Benefits
RM

Carrying Amt Bal bld 1/1l0g

New additions

Bal c/d 31112109

Less. Accum Depre
2Oo/ox60l<x4y 2oo/o x29k (2Qo/ox3Ol<x4y)

60,000 20,000 80,000 (48,000) (4,000)

30,000 30,000

4,000 2.000 6,000

(24,OOO)

Carrying amt 31tQtAg

28,000

6,000

000

Tax Base:
Cost -Accum Cap All {40%x80,000) (20%x60,000x3y) (25%x30kx4y) 80,000 (32,000) (36,000) (30,000)
12,OO0

30,000

Tax base Temp. difference

Deferred Tax liability TTD RM 16,000 6,000

16,000

6,000

6,000

DTD RM

Net TD
RM

Machine MA/ehicles Retirement Benefit Liability i4,000+2,ggg;

6,000
22.AAA

6,000

16,000
X260/0

Def. tax liability

4.10q

r.s
31112 Bal c/d

31112 Bal c/d

Deferred Tax AJc RM 2008 111 Bal bld 16,750 3,254 20.000 2009 1/19al bld tq 4.160 4.160

20.000 3,250 910 4.160

SUGGESTED SOLUTION

QuestionT (November

2AOg)

Determination of Tax Base

Bank Accrued Provision Frovision Loan interest for for D/Debts *llarranties 40,000 2,OOO 2,000 4,000 Carrying amount 0 2.000 2.000 :{!00 Less amt deductible for future taxation 40,000 0 0 TaxBase _ q
Assets
Carrying amount Less Taxable future benefits Tax Base

Liabilities

Account receivable 28,000 00 28,000

Development

Prepaid trave!$ing expenses

14,440 14,404 PPE 600,000 600,000 600KX25%X4

Cost Less CapitalAllowance

24,AOO 24.004 00

expenditure

Tax Base

a)

Determination of taxable or deductible temporary difference

Plant & Equipment Development exp 10% Bank Loan Accrued interest Accounts receivable- Gross (26,000+2,000) Provision for dfoubtful debts Penalties payable Provision for warranties Trade payable

Carrying Value 120,000 24,OAO 40,000 2,CI00 28,000 2,000 800 4,000 14,000 59,200 14,40A

Tax 0 0
Base
40,000

TTD
120,00CI 24,OOA

ETD

2,0CC

28.000

Nil . 14,000 59,200

14,4OA

2,*CI0

:'

'.lS

Bank
Tax

Prepaid travelling

expenses

144,00fi : 26'/o
37,440

''i0

b)

DT liability DT Asset *Penalties payable not allowed for taxation

rate

-r*'ib

S80

permanent differenee-:

SUGGESTED SOLUTION

c)

lS: Restatement
(4o/ox12,AAO)

Deferred Tax aJc Bal b/d 480 IS 35,360 35,840 PYTD = 12,000

3,600 32,240

Bal c/d

35,840

30o/o

X PYTD (prior yr temp diff) = 3,600

Question

(October 2O1O, extract)

C. Deferred tax

(a)

Tax base & temporary difference

Temporary difference
RM

RM

Property Tax base Cost lnitial allowance (1 5olo) Annual allowance {17% x 3 yrs)
Carrying amount

650,000 (e7,500) (331,s00)

221,OAO

580,000

359,000

Warranty Tax base Carrying amount Amount deductible for future taxation
Carrying amount

10,000
1C,000

0 10,000

10,000

(b)
A

Deferred tax asseVliability

taxable temporary difference will result in deferred tax liability and a deductible temporary difference will result in deferred tax asset. Since the carrying amount of the property is greater that its tax base, the temporary difference is a taxable temporary difference. Multiplying the difference with the tax rate will result in a deferred tax liability. Wananty is a liability. Although its carrying amount is also greater than its tax base, the temporary difference is a deductible temporary difference. Multiplying the difference with the tax rate will result in a deferred tax asset.

SUGGESTED SOLUTION

Question 9 (FAR 500, Nov 2005)

a)

Temporary differences
Accounting
RM

Tax base
RM

Temp diff
RM

Tax rate

Defered tax
RM

Equipment Cost
Less

15,000 3,000

Cost

15 000

Annual depn

Bal c/d 31/6/01 Equipment 2 Cost Less Annual depn Equipmeni 1 Equipment 2 Bal c/d 3116lA2 Equipment 3 Cost Less Annual depn Equipment 1 Equipment 2 Equipment 3 Bal c/d 3116103 Less Annuai depn Equipment 1 Equipment 2 Bal c/d 3116104

Less Cap. allowance lnitial (20olo) Annual Q}o/o\ 12,044 Bal cld 3116101 Equipment 2 12,OOO Cost
24,OOO

3,000 6.000 6,000 12,000 18,000

6,000

3gok

2,280

Less Cap. allowance 3,000 Annual Eq 1 2,400 lnitial Eq 2 Annual Eo 2 18,600 Bal c/d 3116102 Equipment 3 17,000 Cost Less Cap. allowance 3,000 Annual Eq 1 2,4AO Annual Eq 2 3.400 lnitial Eq 2 Annual Eq 2 26,800 Bal c/d 3116103 Less Cap. allowance 3,000 Annual Eq'1 2,400 Annual Eq 2 3,400 Annual Eo 2 18,000

6,000 2,404 4,800 4,800 17,000

13,800

36%

4,968

4,800 3,400 6.800 6,800

20,000

340k

6,800

6,800 18,000
32o/o

5,760

SUGGESTED SOLUTION

Alternatively Year ending

30/06/2001 RM

30t06t2002 30/06/2003
RM RM

30to6t2004
RM

Carrying amount
Cost Equipment 1 Equipment 2 Equipment 3 15,000
15,000
12,OOO

15,000 12,000

Total cost
Less:

15,000

27,gOA

17.000 44,000

15,000 12,000 17,000 44,000

Accum.Depreciation: Equipment 1 Equipment 2 Equipment 3 Carrying amount

3,000

6,000 2,400 18,600

12,000

9,000 4,800 3.400 26,800

Q,OAO

7,244 6,800 18,000

Tax base Total cost "

Less:

15,000

27,440

44,000

44,000

lnitial Capital Allowance Equipment 1 Equipment 2 Equipment 3

3,000

3,000 2,404

3,000 2,400 3,400

3,000 2,400 3,400

Accum. Annual Capital Allowance 6,000 Equipment 1 Equipment 2 Equipment 3 6,ooo Tax base Temporary Difference 6,000 38o/o lncome tax rate Deferred Tax 2,28O

n,aao
4,800 4,800
13,800

4,968

364/o

12,000 9,600 6,800 6,800 20,000 34% 6,800

12,000 9,600 13,600 18,000 32% 5,760

- Total cost should be the same as per calcuiation for carrying amouni.

SUGGESTED SOLUTION

b)

Deferred Tax a/c

RM RM

3A|UOI Bal c/d

2,280 3016/01 lnc. Statement 2,284 1l7lo1Bal b/d

3A161A2lnc. Statement

2,280

3:?-22
117101 lnc Statemet -

2,280
2.808

Restatement 3016/02 Bal c1d

tr:::

117lO2lnc Statemet Restatement 3016/03 Bal c/d

117lO2 Bal b/d

4,968

276 6,800

30/6103 lnc. Statement

2.108
]=2',=? 6,800

l:!!-?
117lO3lnc Statemet -

1ft1A3 Bal b/d

Restatement 3016/04lnc. Statement Batc/d

400 640 5,760 6,800

10