Accounting adjustments

RS has two accounting adjustments in 20X2 that create temporary differences for deferred tax purposes:

(i) At the year end $40,000 of accrued interest receivable has been included in the accounts.

It is expected to be received in Spring 20X3 and it will be taxed only on receipt.

(ii) A provision of $80,000 has been made for unfunded pension costs. Tax relief on this will be given only when the retirement benefits are actually paid.

Requirement

Calculate the deferred tax impact of these adjustments for the year end accounts of RS, assuming an effective tax rate of 30%.

Solution:

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