Consider Each of the Following Separate Situations

question 26

Essay

Consider each of the following separate situations.State whether each gives rise to a deferred tax asset (DTA)or a deferred tax liability (DTL).Give reasons for your answer and also indicate why and when any DTA or DTL will be reversed in the accounting records.
(i)Depreciation for accounting purposes exceeds depreciation allowed for income tax purposes
(ii) A provision for doubtful debts has been made for the first time
(iii) Goodwill is beingamortisedeach year
(iv) A loss has been incurred, for both accountingand taxation purposes, but the company expects to earn profits in each of the next two years

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Definitions:

Tax Proration

The division or allocation of taxes between parties (such as buyers and sellers) based on their period of ownership or usage.

Annual Tax Bill

The total amount of tax owed by an individual or corporation in a given fiscal year.

Taxable Income

The amount of income that is used to calculate how much tax an individual or a company owes to the government.

Part-time Janitor

A Part-time Janitor is an individual employed on a less than full-time basis to perform cleaning and maintenance duties in a building or facility.