Dumovelle holds a press with a carrying amount of 800,000. Under the legislation in the case, if it is used, its tax base is 500,000 and the income is taxed at 25%; if it is sold, the tax base (indexed cost) is 650,000 and the gain is taxed at 20%. At the reporting date, Dumovelle expects to use the press until the end of its useful life. Compute the deferred tax liability to be recognised, then the one that would have resulted from an expected sale.
- Carrying amount of the press
- 800,000
- Tax base if used
- 500,000
- Rate if used (%)
- 25 %
- Tax base if sold
- 650,000
- Rate on the gain on sale (%)
- 20 %