Reference no: EM132998699

Question - Tempest Ltd has accounts receivable of $900,000 and an associated doubtful debts allowance of $180,000. The revenue associated with the accounts receivable of $900,000 has already been included in taxable income. The doubtful debts will be deductible when the amount is actually written off as bad with a related deduction to accounts receivable.

Required -

i) Assuming that the tax rate is 30 per cent, what is the amount of the temporary difference?

ii) Does this give rise to a deferred tax asset or a deferred tax liability, and what is the amount of the deferred tax asset/liability?