AB acquired non-current assets on 1 April 2003 costing $250,000. The assets qualified for accelerated first year tax allowance at the rate of 50% for the first year. The second and subsequent years were at a tax depreciation rate of 25% per year on the reducing balance method. AB depreciates all non-current assets at 20% a year on the straight line basis. The rate of corporate income tax applying to AB for 2003/04 and 2004/05 was 30%. Assume AB has no other qualifying non-current assets.

Apply IAS 12 Income Taxes and calculate:

(a) the deferred tax balance required at 31 March 2004;

(b) the deferred tax balance required at 31 March 2005;

(c) the charge to the income statement for the year ended 31 March 2005.

Answer rating: 100% (QA)

ANSWERS a The deferred tax balance required at 31 March 2004 is 0 b The deferred tax balance require... View the full answer