ACCA FR · Chapter 9 · Question 1 of 8
Last year Teal Co estimated its income tax liability at $400,000, but the amount finally agreed and paid was $430,000. For the current year it estimates income tax of $520,000. Ignoring deferred tax, what is the tax charge in the current year's statement of profit or loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $550,000
Explanation
The tax charge is the current year estimate plus last year's under-provision. Under-provision = $430,000 - $400,000 = $30,000. Tax charge = $520,000 + $30,000 = $550,000. The liability in the SFP is the current estimate of $520,000, because last year's liability has been settled.
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