Calculate the deferred tax liability and tax expense

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On 1 July 2018, Demon Ltd purchased machinery for $50,000. The tax base of the machinery before depreciation was also $50,000. The machinery is depreciated at 10 per cent per year on a straight-line basis for accounting purposes and at 20 per cent per year on a straight-line basis for tax purposes. There is no residual value. On 1 July 2020, the machinery was revalued to $45,000 for accounting purposes. The revaluation did not affect the taxable profit for the period ended 30 June 2020. The tax rate is 30 per cent.

Required:

Problem 1: Calculate the deferred tax liability and tax expense as at 1 July 2020 in accordance with AASB 112 "Income Taxes".

Reference no: EM132989749

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