Illustration of Corporate tax
During the year ended31/12/2003, A Ltd. had estimated the corporation tax for the year to be £100,000. The amount was still outstanding as at 31/12/03. During the year ended 2004, on 30th June the actual amount payable was agreed with the tax authorities and eventually paid. Meanwhile during the year 2004, the company paid additional investment taxes of £80,000. As at the end of the year the company the company estimated that he payable for year 2004 will be £120,000.
Required:
Compute the income tax expense and the balance sheet liability for year 2004 assuming that; A
a) The actual tax paid for year 2003 was £90,000
b) The actual tax paid for year 2003 was £110,000.
a) Tax for 2003 (£90,000) – Over provision of previous years tax
Profit and loss change in 2004
|
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Current years tax estimate
|
120,000
|
|
Less overprovision of previous years tax (100 – 90) ‘000’
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(10,000)
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|
Income tax expense
|
110,000
|
Balance sheet liability
|
|
Current years tax estimate
|
120,000
|
|
Less installment taxes paid
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(80,000)
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|
Current tax
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40,000
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a) Tax for 2003 (£110,000) – Under provision of previous years tax
Profit and loss change in 2004
|
|
Current years tax estimate
|
120,000
|
|
Add: underprovision of previous years tax (100 – 110)
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10,000
|
|
Income tax expense
|
130,000
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