ACCA FR · Chapter 9 · Question 8 of 8
At the start of the year Pochard Co had a deferred tax liability of $150,000. During the year taxable temporary differences on plant increased by $100,000, and a property revaluation created a further taxable temporary difference of $200,000. The tax rate is 25%. What is the closing deferred tax liability, and what deferred tax is charged to profit or loss?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Closing liability $225,000; $25,000 charged to profit or loss
Explanation
Increase on plant = $100,000 x 25% = $25,000, charged to profit or loss. Increase from the revaluation = $200,000 x 25% = $50,000, charged to OCI. Closing liability = $150,000 + $25,000 + $50,000 = $225,000.
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