Illustration of corporate tax-income tax-financial statement, Financial Accounting

Illustration of Corporate tax

During the year ended31/12/2003, A Ltd. had estimated the corporation tax for the year to be £100,000. The amount was still outstanding as at 31/12/03. During the year ended 2004, on 30th June the actual amount payable was agreed with the tax authorities and eventually paid.  Meanwhile during the year 2004, the company paid additional investment taxes of £80,000. As at the end of the year the company the company estimated that he payable for year 2004 will be £120,000.

Required:
Compute the income tax expense and the balance sheet liability for year 2004 assuming that; A

a) The actual tax paid for  year 2003 was £90,000
b) The actual tax paid for year 2003 was £110,000.

a)    Tax for 2003 (£90,000) – Over provision of previous years tax

 

Profit and loss change in 2004

Current years tax estimate

120,000

Less overprovision of previous years tax (100 – 90) ‘000’

(10,000)

Income tax expense

110,000

 

 

Balance sheet liability

Current years tax estimate

120,000

Less installment taxes paid

(80,000)

Current tax

  40,000

 

a)    Tax for 2003 (£110,000) – Under provision of previous years tax

 

Profit and loss change in 2004

Current years tax estimate

120,000

Add:  underprovision of previous years tax (100 – 110)

  10,000

Income tax expense

130,000

 

 

 

 

Posted Date: 12/12/2012 12:31:02 AM | Location : United States







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