AF314 Corporate Accounting: Deferred Tax Calculation - 2018

This assignment focuses on the calculation of deferred tax for Bula Island Limited as of June 30, 2018, based on provided financial data. The solution begins with the calculation of current tax expense, considering various revenue streams such as sales, interest, royalties, and dividends, along with expenses including research and development, cost of goods sold, and wages. Adjustments are made to arrive at profit before and after tax. The deferred tax liability is then calculated, reconciling tax paid per the profit and loss statement with the tax expense. Finally, the assignment addresses the allocation of resources, specifically focusing on the allocation of assets across different segments such as dairy, yoghurt, and chocolate, using a defined allocation method. The assignment includes a bibliography of relevant academic sources.

Running head: DEFERRED TAX
DEFERRED TAX
Name of the Student
Name of the University
Author Note:

1DEFERRED TAX
Table of Contents
Discussion........................................................................................................................................2
Calculation of deferred tax:.........................................................................................................2
Deferred Tax Liability.................................................................................................................3
Allocation of resources................................................................................................................3
Bibliography....................................................................................................................................4

2DEFERRED TAX
Discussion
Calculation of deferred tax:
Calculation of Deferred tax
For the year 30th June 2018
Calculation of current tax expense Amount
INCOME
Sales Revenue
$
9,245,000
Interest Revenue
$
875,000
Royalities Revenue
$
1,625,000
Revaluation of land
$
750,000
Dividend revenue
$
150,000
Total Revenue
$
12,645,000
Expenses
Research and development expense
$
1,650,000
Cost of goods sold
$
4,005,000
Warranty Expense
$
180,000
Wages and salaries expense
$
3,395,000
Long service leave expense
$
125,000
Depreciation on Plant
$
185,000
Depreciation on Building
$
73,750
Depreciation on equipment
$
93,750
Interest expense
$
305,000
Rates and taxes on property
$
145,500
Doubtful debt expenses
$
142,500
Total Expense $

3DEFERRED TAX
10,300,500
Profit before adjustment $ 2,344,500
Less: additional exp allowance on R&D
$
412,500
Profit after adjustment $ 1,932,000
Tax @25%
$
483,000
Profit after tax $ 1,449,000
Deferred Tax Liability
Deferred Tax (liability)
Tax paid as per
P/l 418350 Tax expense 483000
Balance c/d 64650
483000 483000
Balance b/d 64650
Allocation of resources
Working note: Allocation of assets
Particulars DAIRY
YOGHUR
T CHOCOLATE
Net Assets
128000
0 880000 640000
1) Headquarter assets allocation (1:1:1) 60000 60000 60000
2) Research assets allocation (128:88:64) 45714 31429 22857
Total Assets
138571
4 971429 722857

4DEFERRED TAX
Bibliography
Chytis, E., Koumanakos, E. and Goumas, S., 2015. Deferred Tax Positions under the prism of
financial crisis and the effects of a corporate tax reform. International Journal of Corporate
Finance and Accounting (IJCFA), 2(2), pp.21-58.
Mullinova, S. and Simonyants, N., 2016. Reflection of a deferred tax liability in the credit union
reporting according to IFRS (IAS) 12" Income taxes". Modern European Researches, (1), pp.83-
88.
Hanlon, D., Navissi, F. and Soepriyanto, G., 2014. The value relevance of deferred tax attributed
to asset revaluations. Journal of Contemporary Accounting & Economics, 10(2), pp.87-99.
Bauman, M.P. and Shaw, K.W., 2016. Balance sheet classification and the valuation of deferred
taxes. Research in Accounting Regulation, 28(2), pp.77-85.
Wang, Y., Butterfield, S. and Campbell, M., 2016. Deferred tax items as earnings management
indicators. International Management Review, 12(2), pp.37-42.