Exercise 6.1 ★ TAX EFFECTS OF A TEMPORARY DIFFERENCE The following information was extracted from the records of Protea Ltd for the year ended 30 June 2013: PROTEA LTD Deferred Tax Worksheet (extract) as at 30 June 2013 Carrying amount Future Taxable amount Future deductible amount Tax base Taxable temporary differences Deductible temporary differences Relevant assets Equipment £75 000 £(75 000) £120 000 £120 000 £45 000 The equipment cost £300 000 and is depreciated at 25% p.a. straight-line for accounting purposes, but the allowable rate for taxation is 20% p.a. Required Assuming that no equipment is purchased or sold during the years ended 30 June 2014 and 30 June 2015, calculate:

(a) the accounting expense and tax deduction for each year

(b) the impact of depreciation on the taxable profi t for each year

(c) the movement in the temporary difference balance for each year.