Question 1

When the carrying amount of an asset exceeds the tax base, there will be a deferred tax ..... (a)  ......; because the taxation payments have effectively been ...... (b) :

Accepted Answer

A)   (a)  Asset; (b)  made in advance of recognising the expense.
B)   (a)  Asset; (b)  deferred to future periods.
C)   (a)  Liability; (b)  made in advance of recognising the expense.
D)   (a)  Liability; (b)  deferred to future periods.
E)   (a)  Reserve; (b)  deferred to future periods.

Question 2

On 1 January 2012, William Bay Ltd purchased a machine for $100,000. The entity adopts a straight-line depreciation method and uses 10% and 15% as depreciation rate and tax rate, respectively. The salvage value is zero and the tax rate is 30%.
At 31 December 2012, which of the following statements is correct with respect to this transaction only that is in accordance with AASB 112 "Income Taxes"?

Accepted Answer

A)   There is a deductible temporary difference of $5,000.
B)   There is a deductible temporary difference of $1,500.
C)   There is a taxable temporary difference of $5,000.
D)   There is a taxable temporary difference of $1,500.
E)   The deferred tax liability is $5,000.

Question 3

Raging Dragons Ltd has a depreciable asset that is estimated for accounting purposes to have a useful life of 15 years. For taxation purposes the useful life is 10 years. The asset was purchased at the beginning of year 1, there is no residual value, and the straight-line method of depreciation is used for both tax and accounting purposes. The tax rate is 30 per cent and the cost of the asset is $150,000. What adjustment will be required to the deferred tax liability account in years 10 and 11?

Accepted Answer

A)   End of year 10: $1,500; Year 11: $1,500
B)   End of year 10: $5,000; Year 11: $(10,000) 
C)   End of year 10: $1,500; Year 11: $(3,000) 
D)   End of year 10: $15,000; Year 11: $(3,000) 
E)   None of the given answers.

Question 4

The tax-effect of the temporary difference that arises from revaluation of non-current assets is recognised in profit and loss.

Accepted Answer

A) True 
 B)False

Question 5

The transfer of tax losses to other entities within a group:

Accepted Answer

A)   Is no longer permitted in Australia under the new tax consolidation regime.
B)   Is not addressed in AASB 112.
C)   Can only be performed by entities within a tax consolidated group.
D)   Is not addressed in AASB 112 and can only be performed by entities within a tax consolidated group.
E)   None of the given answers.

Exam 19: Accounting for Income Taxes

When the carrying amount of an asset exceeds the tax base, there will be a deferred tax ..... (a) ......; because the taxation payments have effectively been ...... (b) :

Correct Answer
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Correct Answer
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Correct Answer
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The transfer of tax losses to other entities within a group:

Correct Answer
verified

The tax-effect of the temporary difference that arises from revaluation of non-current assets is recognised in profit and loss.

Correct Answer
verified

Exam 19: Accounting for Income Taxes

When the carrying amount of an asset exceeds the tax base, there will be a deferred tax ..... (a) ......; because the taxation payments have effectively been ...... (b) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The transfer of tax losses to other entities within a group:

Correct AnswerverifiedShow Answer

The tax-effect of the temporary difference that arises from revaluation of non-current assets is recognised in profit and loss.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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