At 30 June 2020, Aqua Ltd recognised a deferred tax
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At 30 June 2020, Aqua Ltd recognised a deferred tax asset of $9 000 and a deferred tax liability of $12 000. This has resulted by applying a tax rate of 30%. Because of mounting debt due to extravagant spending, the Australian government has determined to raise more revenue from companies by way of taxation. It announced that it will increase the tax rate as of 1 July 2020 to 34%.
Required
Discuss how the change in tax rate would affect the existing deferred tax balances and the calculation of tax in future years. Include in your answer the adjusting journal entries that would be required, and how the adjustments were calculated.
Discuss what Aqua Ltd would disclose for deferred tax (using the adjusted figures) if they decide to offset their figures.
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