Question $1$

A$.$ Define the following terms as per IAS $12,$ Income tax.

i$.$ Deferred tax liability

ii$.$ Deferred tax asset

iii. Temporary differences

iv$.$ Tax base

$(6$ marks$)$

B$.$ You have been provided with the following information from the books of Swede Ltd for the year ended $31$ December $2020.$

Swede Ltd made taxable trading profit of $GHC2,400,000$ on which income tax is payable at $30\%.$

$7$

CS CamScanner

EXAM CODE $01$

A transfer of $GHC40,000$ is made to the deferred taxation account. The opening balance on this account was GHC$200,000.$

The estimated tax on profits for the year ended $31$ December $2019$ was $GHC160,000,$ but tax has now been agreed at GHC$168,000$ and fully paid.

Tax on profits for the year to $31$ December $2020$ is payable on $1$ September $2021.$

In the year to $31$ December $2020,$ the company made a capital gain of $GHCl20,000$ on the sale of some property. This gain is taxable at a rate of $25\%$

Required:

i$.$ Calculate the tax charge and extracts from the statement of profit or loss for the year ended $31$ December $2020.$

$(4$ marks$)$

ii$.$ Calculate the tax liabilities and extract from the statement of financial position of Swede Ltd as at $31$ December $2020.$

$(4$ marks$)$

C$.$ Jossy Logistics acquired an item of plant and machinery on $1$ January $2020$ to augment the set$-$up of a manufacturing facility in a deprived community. The plant and machinery cost GH$6,000,000.$

On $1$ January $2020,$ the entity received a government grant of $GH!in2,000,000$ as support for the acquisition of the plant and machinery.

The plant and machinery have estimated economic useful life of $8$ years and depreciation is on straight$-$line basis. The entity accounts for government grants for assets using net$-$of$-$cost approach.

Required:

a$.$ Explain how the above transaction should be accounted for and pass journal entries to record the transaction on $1$ January $2020.$

$(4$ marks$)$

b$.$ Prepare extracts from the statement of profit or loss and the statement of financial position for the year ended $31$ December $2020.$

$(2$ marks$)$

$]=[20$ Marks