TAXATION IN ACCOUNTS

[Dagabie]

Hello!

Practical accounting

calculate the retained profit for the year from the following information:

2008 net profit before tax per accounts $2000

Taxable profit $1500

Deferred tax provision for the year 2008 $200

Dividend paid $800

Dividends received during the year $900


Assume corporation tax of 50%

Income tax 30%.

[Dagabie]

Hello!

Answer:

$
Profit before tax 2,000
Add investment income(w1) 1,286
Adj.Profit before tax 3,286

Taxation(w2) (1,336)

Profit after tax 1,950

Dividend paid (800)

RETAINED PROFIT 1,150


Workings(w)

1. Investment income:
Dividend received(net) $900.
Gross dividend received = $900 x 100/70 = $1285.71

2.Taxation: $
corporation tax -
taxable profit $1500 x 50% = 750

add income tax on dividend
received $900 x 30/70 = 386

add deferred tax provision = 200

TOTAL 1,336