ACCA FA · Chapter 11 · Question 3 of 12
A company estimates its income tax for the current year at $46,000. The tax liability for the previous year was estimated at $38,000, but was settled during the current year for $41,000. What is the income tax expense in the statement of profit or loss for the current year?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $49,000
Explanation
The previous year's liability was under-provided by $41,000 - $38,000 = $3,000, which is charged in the current year. Tax expense = $46,000 + $3,000 = $49,000. The liability in the statement of financial position is the current estimate of $46,000. Treating the difference as an over-provision gives $43,000.
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