Answered Essay: fect of income tax for the current year, disclosed the following information:

On 30 June 2012, an extract of Kendall Ltd’s statement of financial position, prepared for internal purposes but excluding the effect of income tax for the current year, disclosed the following information:

Accumulated Depreciation
Deferred Tax Asset
$6727 (timing differences only)
Accounts Payable
Provision for Annual Leave
Deferred Tax Liability


The Machinery was acquired on 1 July 2010. Depreciation for accounting purposes was 8.5% (straight line), while 11% (straight line) was used for tax purposes.

The tax rate is 30%.

What is the value of the adjustment to the Deferred Tax Asset for 30 June 2012?
Do not net the Deferred Tax Asset account and the Deferred Tax liability Accounts.

Expert Answer



Determining the Value of the Adjustment of Deferred Tax Asset and Deferred Tax Liability for June 30, 2012:

Carrying Amount Assessable Amount Deductible Amount Tax Base Taxable Temporary Difference Deductible Temporary Difference
Bank $40,000 $0 $0 $40,000
Inventory $27,409 ($27,409) $27,409 $27,409
Machinery $400,000 ($400,000) $393,273 $393,273 $10,000
Accounts Payable $34,096 $0 $0 $34,096
Provision for Annual Leave $16,512 $0 ($16,512) $0 $16,512
Deferred Tax Liability $3,000
Deferred Tax Asset $4,954
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