Reference no: EM133079154

Question - Madaraka Limited, a calendar year firm, purchased a bulldozer for Ksh 80 million on 1st January 2016. The asset had a life of 5 years and was depreciated using straight-line basis for accounting purposes while capital allowances were claimed using reducing balance basis at 60% for tax purposes. At the beginning of year three, the government made a sudden announcement reducing tax rate from 30% to 20%. This is only asset giving rise to deferred taxes in the organisation during the period under consideration.

Required - Compute and disclose the amount of deferred taxes that would be disclosed in statements of financial position and comprehensive incomes in the five years from 2016 to 2020.