Reference no: EM133133951
Question - Transide Limited had profit before tax of $1,000,000. And it has the following transactions:
i. On 1 April 20X1, Transide Ltd (Transide) constructed a building to use as a warehouse at a cost of HK$650,000. For accounting purposes, the building is depreciated on a straight-line basis over 10 years. For tax purposes, Transide is entitled to an annual capital allowance deduction of 4% on cost.
ii. Transide Ltd made a general provision for doubtful debt of $200,000 during the year ended 31 March 20x2. The provision is non tax deductible according to the tax law until it is proved that the debts are irrecoverable. During the year, one of the customers who owed Transide $30,000 proved to be bankrupted.
Required -
a. Calculate the current tax liabilities for the year ended 31 March 20x1. Assume a profits tax rate of 16.50%.
b. What are the accounting base and tax base of items (i) and (ii). Calculate the amount of deferred tax liabilities or assets to be recognised with respect to the above transactions as of 31 March 20X2? Show the journal entries.
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