Tex limited bought a manufacturing plant for R 500 000 on 1 January 2016 and put it into production immediately.

The plant had a useful life of 5 years, a residual value of nil and is depreciated using the straight line basis.

The profit before taxation in 2019 was R 150 000 (2018: R 120 000)

The tax authorities allow wear and tear on the following basis:

i)   50% of the cost in the first year

ii)   30% of the cost in the second year 

iii)  20% of the cost in the third year

 The tax rate remained constant at 40% from 2016 to 2019

The company's financial year ends on 31 December

There is no other difference between accounting profit and taxable profit other than those evident from the information given. 

The plant was sold for R 300 000 on 31 December 2019

Required

a)  Calculate deferred tax using the balance sheet approach for 2016 to 2019

b)  Calculate the taxable profit and current income tax expense for 2018 and 2019

Answer rating: 100% (QA)

a Calculating Deferred Tax using the Balance Sheet Approach for 2016 to 2019 To calculate deferred tax we need to determine the temporary difference b... View the full answer