The Ruins Ltd. has a preliminary profit (before recording a provision) of 900.000 in the...

Transcribed Image Text:

The Ruins Ltd. has a preliminary profit (before recording a provision) of € 900.000 in the accounting period 2013 and the next 3 years. In the year 2013 it signed a contract for the construction of a bridge, during the last quarter of 2013 it recognized that it will make a total loss of € 100.000 with this project after its completion in the year 2016. Therefore it records a provision for uncompleted transactions of € 100.000 at the end of 2013. The national tax law prohibits such a provision and also the "stage of completion"-method for for the recognition of projects being under construction. The tax rate is 30% on the taxable profit for computing the income taxes. Which kind of taxes is to report in the financials statements and describe the situation by using headwords and recording the journal entries in the years. (9 p.) The Ruins Ltd. has a preliminary profit (before recording a provision) of € 900.000 in the accounting period 2013 and the next 3 years. In the year 2013 it signed a contract for the construction of a bridge, during the last quarter of 2013 it recognized that it will make a total loss of € 100.000 with this project after its completion in the year 2016. Therefore it records a provision for uncompleted transactions of € 100.000 at the end of 2013. The national tax law prohibits such a provision and also the "stage of completion"-method for for the recognition of projects being under construction. The tax rate is 30% on the taxable profit for computing the income taxes. Which kind of taxes is to report in the financials statements and describe the situation by using headwords and recording the journal entries in the years. (9 p.)