Explain the impact that the change in deferred tax liability

Assignment Help Financial Accounting
Reference no: EM132941696

A local bakery constructed an oven on January 1, 2017. The construction cost includes direct material, direct labour and overheads of $20 million, $30 million and $100 million respectively. Only 70% of the total overheads is considered reasonable. The oven is expected to have useful life of 25 years and depreciated on a straight line basis to residual value of $2 million. However, the oven has a burner that is to be replaced every four years. The burner represents 45% of the assets total capitalized cost. The burner is to be depreciated using a straight line basis to a residual value of $8 million. Both the burner and the main oven attract capital allowance at 20% per annum on a straight line basis. The current tax rate is 25%.

Required:

Problem a. Determine the carrying value of the asset at the end of 2017 and 2018

Problem b. Determine the deferred tax liability balance at the end of 2017 and 2018

Problem c. Prepare the relevant financial statement extracts for 2017 and 2018

Problem d. Explain the impact that the change in the deferred tax liability between 2017 and 2018 would have on the 2018 financial statements

 

Reference no: EM132941696

Questions Cloud

Demonstrate or apply the stakeholder theory : Demonstrate or apply the stakeholder theory and the power/interest matrix that was learned about in the initial course in the MHA program
Conducts a significant amount of business with china : Conducts a significant amount of business with China, India, and Mexico. In class, we will watch a film about conducting business in China
What would have been the amount of dividend income : Directors decided to pay a dividend of $0.40/share with an ex-date of 3/31/21, what would have been the amount and characterization of your dividend income?
What are the main factors of writing and presentations : what are the main factors of writing and presentations that they have to learn about them?
Explain the impact that the change in deferred tax liability : Explain the impact that the change in the deferred tax liability between 2017 and 2018 would have on the 2018 financial statements
Create the entity statement of changes in equity for year : Create the entity's statement of changes in equity for the year 2019. Since ABC Ltd's date of incorporation, it has been recognising the purchase
Daniel pink concept of intrinsic motivation : Identify the three components of Daniel Pink's concept of intrinsic motivation (from "The Surprising Truth About What Motivates Us" video) AND briefly discuss h
Determining the emergency operations plan : Who needs to approve and sign the plan before you publish or update the Emergency Operations Plan (EOP)? Please include at least one reference.
Make the statement of profit and loss for period ended dec : Make the statement of profit and loss for the period ended December 31, 2019. The process involved selling off the entire assets of the division plus paying

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the present value and duration of your obligation

You will be paying $10,000 a year in tuition expenses at the end of each of the next two years. What is the present value and duration of your obligation

  What dollar amount would the current market price of bonds

Rate of return on these Treasury bonds to increase by 1.50% to 8.50%, by what dollar amount would the current market price of these bonds decrease?

  What is the irr of the project

What is the IRR of this project? Management of Sunland, Inc., an aviation firm, is considering purchasing three aircraft for a total cost of $149,352,965

  What is the tax effect adjustment

Effective from the first day of the next financial period, the company rate of income tax was decreased from 25% to 20%. What is the tax effect adjustment

  Find the company bond rating from capital iq

Find the company's bond rating from Capital IQ and then pick the yield spread. Estimate the WACC of Amazon at the end of 2019.

  How accelerated depreciation can affect project cash flows

Explain What would process be to ensure that all related financial details are allocated for and tracked so as to assist in making sound business decisions?

  Three mutually exclusive alternatives

There are three mutually exclusive alternatives that are candidates for implementation by the Yellow Freight Company's sorting operations center, and doing nothing is not an option. All alternatives have a life of 10 years, and they have negligible m..

  Which security do you choose

A perpetuity that pays $10,000 forever, but the first cash payment is 11 years from today. Which security do you choose if the annual interest rate is 5%

  How much cash was collerted from customers during the year

How much cash was collerted from customers during the year? Philip Corp reported credit sales of $240,000 and write-offs of bad debts of $57,000

  Record all transactions related to these bonds

At the maturity date, 60% of the owners choose to convert the instruments (at the bond-to-share rate of 3:1). Record all transactions related to these bonds

  Calculation of variances for direct material and direct

calculation of variances for direct material and direct labor.nevada learning aids makes wooden lap desks. a small fire

  Prepare journal entery in books of lessee for first two year

Prepare Journal entries in the books of lessee for first two years,Interest expenses to be reported in profit and loss accounts for years

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd