Under additional info part 2, it says "Corporation tax based profit for 2008 is estimated at 500,000), Does anyone else interpert this as "The adjusted tax profit for the year is 500,000" Meaning when the corporation tax rate is applied, the tax charge is 140,000?. The solution charges tax at 500,000. Why couldnt the question just say Corporation tax for 2008 is estimated at 500k instead of causing any confusion. Would this cost any marks in an exam, because it doesnt seem to affect anything as the tax liability and retained earnings balance eachother in the balance sheet
Hi, My interpretation is that it is the corporation tax estimated from the accounting profits. It is an estimate because the the tax authorities will make adjustments to it when deriving taxable profits. This is my rationale as to why it takes a number of months for the tax payable to take a number of months after the production of the end of year balance sheet. Any other interpretations?
Hi. It should say "Corporation tax based on profit for 2008 is estimated at 500,000". Thanks for noticing the missing word. We will ensure it is corrected. The phrasing of the question is based on similar language used in exams in the past. As you say it simply affects the tax liability and retained earnings. Not a big deal unless you were then asked to use these numbers in some further analysis.
