You are provided with the following information from the financial statements of T Inc. for the Year Ended 31st March 2020:

£
Sales	500,000
Accrued Income	40,000
Cost of Goods Sold	125,000
Depreciation	4,000
Salaries	200,000
Rent & Rates	80,000
Advertisement	45,000
Client Entertainment	50,000
Bad Debt provision	10,000
Bank interest charges	3,000
Companies House late filing penalties	1,000

Other information:

1. The Bad Debt provision of £10,000 is made up of £2,000 outstanding debt from one of its major customers Zoe Ltd, and the remaining £8,000 is based on 2% of Tudor’s credit sales for the year, as in line with the company’s policy.
2. Delivery Van originally costing £20,000 with accumulated depreciation of £8,000
3. The applicable corporate tax rate for that year is 30% and the capital allowance rate is 18% (straight-line basis with no first-year allowances).

Required:

a. Calculate the taxable profit for the year ending 31st March 2020

b. Provide the journal entries to account for tax in accordance with IAS 12, supported by the tax reconciliation.

c. IAS 16 states that a company’s ‘depreciation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the company’. Using the example above, explain why it gives rise to ‘timing’ differences.

Answer rating: 100% (QA)

a Calculation of taxable profit for the year ending 31st March 2020 Particulars Amount Sales 500000 ... View the full answer