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Maji Limited had a deferred tax liability of Sh. 105 million as at 1 June 2010. During the year ended 31 May 2011, the...

      

Maji Limited had a deferred tax liability of Sh. 105 million as at 1 June 2010. During the year ended 31 May 2011, the company had the following items with regard to estimating deferred tax:
1. The carrying amount of property, plant and equipment as at 31 May 2011 was Sh.980 million. This included some buildings which were revalued upwards by Sh 50 million at 31 May 2010 which had a remaining useful life of 10 years at that date. The company's accounting policy is to treat revaluation surpluses as realized on disposal of the revalued assets. The tax base of property, plant and equipment as at 31 May 2011 was Sh 640 million.
2. Deferred development expenditure amounted to Sh.45 million at year end (Sh.40 million as at 31 May 2010). Sh.10 million of additional development expenditure was incurred during the year and the remaining difference between 2010 and 2011 figures relates to development expenditure amortized for products that have started being commercially produced. All development expenditure is allowed for tax purposes.
3. Included in current assets is an amount of Sh.40 million due in respect of some patent royalties on one of the company's older products which is now being produced by other companies. Patent royalties are taxed only when received.
4. The company’s tax rate proposals.

Required:
i) The deferred tax balance as at 31 May 2011 and the relevant journal entry.
ii) The directors of Maji Limited have proposed that deferred tax should be discounted and also provided on the share of post-acquisition profits in its subsidiary and associate companies.
Comment on these proposals.

  

Answers


Martin
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marto answered the question on February 14, 2019 at 06:31


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