P Ltd acquired inventories for $150 000,which were sold to its subsidiary S Ltd for $120 000 (assume a tax rate of 30%).On consolidation,a deferred tax liability would be recorded for:
A) $45 000.
B) $36 000.
C) $9000.
D) not recorded.

Question

Quizplus · Accepted Answer

The deferred tax liability is calculated on the temporary difference between the carrying amount of the inventory in the group accounts and its tax base. The temporary difference is $30,000 ($150,000 - $120,000). The deferred tax liability is this difference multiplied by the tax rate: $30,000 * 30% = $9,000.

P Ltd Acquired Inventories for $150 000,which Were Sold to Its