In this qus, tax rate is not given and we need to prepare financial statements. In the solution, they haven't calculated tax expense. And hence, they assumed profit after tax is equal to profit before tax and this profit is added to the retained earnings without calculating any tax. Is it a right approach to do it when tax rate is not given? Shouldn't we assumed tax rate of 30% and calculate it accordingly? The same approach is followed in IAI exam(not calcultical tax if not given in the qus.)? Please anyone help me with this asap. Thank you.
Hi Yes, I'd recommend following the approach the examiners adopted here as it's simplest and they're clearly happy with it, ie if there's no info about tax in the question, don't include tax in the statements. Lynn