Delta Ltd. is working on different projects those are likely to be completed within 3 years period. It recognizes revenue from these contracts on…

CA Intermediate · Advanced Accounting · PYQS · September 2024
Delta Ltd. is working on different projects those are likely to be completed within 3 years period. It recognizes revenue from these contracts on Percentage of Completion Method for Financial Statements for the years ending 2021, 2022 and 2023 for 34 Lakhs, 50 Lakhs and 65 Lakhs respectively. However, for Income Tax purpose, it has adopted the Completed Contract Method under which it has recognized revenue of 30 Lakhs, 52 Lakhs and 67 Lakhs for the years ending 2021, 2022 and 2023 respectively. Income Tax rate is 30%. Compute the amount of Deferred Tax Asset / Liability and Total Tax Expenses for the years ending 31st March 2021, 2022 and 2023. (4+5+5=14 Marks)

Suggested Answer and Working Notes:

Calculation of Deferred Tax Asset/Liability in Delta Limited Year Accounting Income Taxable Income Timing Difference Timing Difference (balance) Deferred Tax Deferred Tax Liability (balance) 2021 34,00,000 30,00,000 4,00,000 4,00,000 1,20,000 1,20,000 2022 50,00,000 52,00,000 (2,00,000) 2,00,000 (60,000) 60,000 2023 65,00,000 67,00,000 (2,00,000) NIL (60,000) NIL 1,49,00,000 1,49,00,000 Calculation of total tax Year Deferred Tax Current tax expense Total tax 2021 1,20,000 9,00,000 10,20,000 (30,00,000 x 30%) 2022 (60,000) 15,60,000 15,00,000 (52,00,000 x 30%) 2023 (60,000) 20,10,000 19,50,000 (67,00,000 x 30%) Note: It is assumed that the revenue and the taxable profit is the same.

Topics: AS 22

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic