Question

Prey Ltd accountant has estimated current tax of P50 000 based on the current profit. The income tax value of the non- current assets are P75 000 and the carrying amount of non-current assets as at 31 December 2020 is P90 000.Tax rate is 22%.

Using information given above, calculate the deferred tax for the year ended 31 December 2020

Answer 1

To calculate the deferred tax for Prey Ltd, we find the temporary difference between the carrying amount and tax base of the non-current assets, and then apply the 22% tax rate. The deferred tax liability for the year ended 31 December 2020 would be P3,300.

Step-by-step explanation:

To calculate the deferred tax for Prey Ltd for the year ended 31 December 2020, we use the tax rate provided and the differences between the carrying amounts and the tax bases of non-current assets. Deferred tax is calculated on the temporary differences that exist at the end of the reporting period between the carrying amount of an asset or liability in the balance sheet and its tax base.

The temporary difference for Prey Ltd is the carrying amount (P90,000) minus the tax base (P75,000), which equals P15,000. The deferred tax is then calculated by multiplying this temporary difference by the tax rate of 22%, so the deferred tax liability is P15,000 × 22% = P3,300.