A non-current asset costing €2,000 was acquired at the start of year 1. It is being depreciated straight line over four years, resulting in annual depreciation charges of €500. Thus a total of €2,000 of depreciation is being charged. The income tax rate is 25%. The capital allowances (=’tax depreciations’) granted on this asset are:

Year 1 €800

Year 2 €600

Year 3 €360

Year 4 €240

Assume that the pretax accounting income is €10.000 each of the following four years.

Required: 

Calculate the deferred tax account, assuming:

1. Data as presented above

2. Data as above but asset is being revalued at the end of year 2 by €1.500.

3. Data as above but the asset is being impaired at the end of year 2 by €800.

Answer rating: 100% (QA)

Step 1 The accounting income ie the ... View the full answer