Commerce and Business
BusinessFinancial AccountingFinancial Accounting and Reporting An International ApproachPractice Set 2490
BusinessFinancial AccountingFinancial Accounting and Reporting An International ApproachPractice Set 2490Accounting For Income Taxes
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Questions Bank
- An Overview of the International External Reporting EnvironmentThe Conceptual Framework of Accounting and Its Relevance to Financial ReportingTheories of Financial AccountingAn Overview of Accounting for AssetsDepreciation of Property, Plant and EquipmentRevaluations and Impairment Testing of Non-Current AssetsInventoryAccounting for IntangiblesAn Overview of Accounting for LiabilitiesAccounting for LeasesShare Capital, Reserves and Share Options Employee Bonus SchemesAccounting for Financial InstrumentsRevenue Recognition IssuesThe Statement of Comprehensive Income and Statement of Changes in EquityAccounting for Income TaxesThe Statement of Cash FlowsEvents Occurring After the Reporting DateRelated-Party DisclosuresEarnings Per ShareFurther Consolidation Issues I: Accounting for Intragroup TransactionsFurther Consolidation Issues II: Accounting for Non-Controlling InterestsFurther Consolidation Issues III: Accounting for Indirect Ownership InterestAccounting for Foreign Currency TransactionsTranslating the Financial Statements of Foreign OperationsAccounting for Corporate Social Responsibility
Question 1
Free
True/False
The tax base of revenue received in advance is equal to zero where the revenue received is taxed in the reporting period that the revenue is received.
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True
False
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Question 2
Free
True/False
Deferred tax assets are the amounts of income taxes recoverable in future periods that arise from assessable temporary differences.
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True
False
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Question 3
Free
Multiple Choice
Which of the following statements is correct with respect to IAS 12 Income Taxes when the government increase tax rates?
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The entity applies a prospective application to deferred tax assets and deferred tax liabilities initially recognised subsequent to the announcement of the tax change.
Expense is recognised if the entity has deferred tax liabilities only.
Income is recognised if the entity has deferred tax liabilities only.
Expense is recognised if the entity has deferred tax assets only.
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Question 4
Free
Multiple Choice
If a tax rate change from 30% to 25% results in an adjustment to the deferred tax liability account of £50 000,what is (a)the amount of the temporary differences and (b)the type of temporary differences?
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(a) £ 1 000 000; (b) taxable temporary differences
(a) £ 1 000 000; (b) deductible temporary differences
(a) £ 50 000; (b) taxable temporary differences
(a) £ 50 000; (b) deductible temporary differences
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Question 5
Free
Multiple Choice
The carrying amount of deferred tax assets and deferred tax liabilities can change:
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with a change in the amount of the related temporary differences.
even if there is no change in the amount of the related temporary differences.
with a re-assessment of the recoverability of deferred tax liabilities.
with a change in the amount of the related temporary differences and even if there is no change in the amount of the related temporary differences.
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Question 6
Multiple Choice
Which of the following statements is not correct in relation to tax rate changes?
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An increase in tax rates will create an expense where an entity has deferred tax liabilities.
Across time it is likely that governments will change tax rates.
A decrease in tax rates will create an income where an entity has deferred tax assets.
Changes in tax rates will have implications for the value attributed to pre-existing deferred tax assets.
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Question 7
Multiple Choice
The carrying amount of a deferred tax asset is reviewed:
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annually
at each reporting date
when assets are revalued
None of the given answers are correct.
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Question 8
Multiple Choice
Criteria used by an entity to assess the probability that taxable profit will be available against which unused tax losses can be utilised include:
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whether the unused tax losses result from identifiable causes that are unlikely to recur.
whether it is probable that the entity will have taxable profits before the unused tax losses expire.
whether permission has been received from the Taxation Authorities to carry forward tax losses.
whether the entity has unused tax losses relating to the same taxation authority and the same taxable entity, which will result in taxable amounts against which the unused tax losses can be utilised before they expire.
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Question 9
Multiple Choice
As at 30 June 2012,the Provision for Long-service leave balance was $125 000.During 2011/12 $54 000 was charged to the provision account,and leave to the value of $34 000 was taken by staff.The balance on 30 June 2013 was $135 000,following the charging of long-service leave expense of the same amount as in 2011/12 ,i.e.$54 000.Assuming there were no other temporary differences,what is the journal entry to adjust for the changes in these balances as at 30 June 2013? The corporate tax rate is 30%.
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Question 10
Multiple Choice
As at 30 June 2012,net accounts receivables was $57 000,and the allowance for doubtful debts was $3000.On 30 June 2013,the respective balances were $64 000 and $4000.Assuming there were no other temporary differences,what is the journal entry to adjust for the changes in these balances as at 30 June 2013? The corporate tax rate is 30%.
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Question 11
Multiple Choice
Temporary differences:
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arise due to differences between income tax legislation and accounting rules, in a particular period, and are reversed in subsequent periods.
can be both deductible temporary differences or taxable temporary differences.
must be considered, and accounted for, by the creation of deferred tax asset and liabilities for all statement of financial position items (e.g.including asset revaluations), rather than just statement of comprehensive income items, which is a major change created by the new standard.
arise due to changes in the income tax rate.
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Question 12
Multiple Choice
When the carrying amount of an asset exceeds the tax base,there will be a deferred tax ,because the taxation payments have effectively been .
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asset; made in advance of recognising the expense
asset; deferred to future periods
liability; made in advance of recognising the expense
liability; deferred to future periods
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Question 13
Multiple Choice
Spring Day Ltd has a piece of equipment that it has revalued to its fair value of $90 000 this period.It originally cost $80 000 and the accumulated depreciation for both accounting and tax purposes is $20 000.There is no intention to sell the equipment in the near future.The tax rate is 30%.What is the journal entry to reflect the revaluation's tax implications?
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Question 14
Multiple Choice
Casper Ltd incurred a loss of $500 000 for tax purposes in 2014.This was due to one-off circumstances and it is expected that Casper will make profits again in 2015 and subsequent years.There are no temporary differences in either year.In 2015 Casper makes a profit of $700 000.The tax rate is 30%.What are the journal entries for 2014 and 2015?
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Question 15
Multiple Choice
The tax base of a liability must be calculated as the liability's carrying amount as at the reporting date,less any future deductible amounts and plus any future assessable amounts that are expected to arise from settling the liability's carrying amount as at the reporting date.The exception to this rule is that:
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In the case of revenue received in advance, the tax base must be calculated as the liability's carrying amount less any amount of the revenue received in advance that has been included in taxable amounts in the current or a previous reporting period.
In the case of carry forward tax losses, the tax base must be adjusted for any consideration paid by a company within the group that is receiving the transferred tax loss.
In the case of a downward revaluation of a non-current asset, the tax base must be calculated as the decrease in the asset plus any amount expected to be received in the future inflated by the index for capital gains tax.
In the case of a warranty liability, the tax base must be calculated as the liability's carrying amount less any amounts paid out this period that have not been included in taxable amounts in the current period.
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Question 16
Multiple Choice
Mighty Motors Ltd offers a warranty on all the spare parts it sells.This period the accrued warranty is $5000.For tax purposes there is no deduction for the warranty until payments are made.Mighty Motors also has equipment that has a useful life for accounting purposes of 4 years and for tax purposes 3 years.The equipment was purchased at the beginning of the current period,cost $9000 and has no residual value.The straight-line method of depreciation is used for both accounting and tax purposes.The accounting profit before tax this period is $80 000.The tax rate is 30%.What are the journal entries to record the tax expense and tax payable?
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Question 17
Multiple Choice
Bulldog Supplies Ltd has an item of equipment that has a carrying value of $80 000.For taxation purposes the asset's net value is $60 000 and deferred tax liabilities of $3000 had previously been recorded.Bulldog also has accrued interest revenue of $5000 that will not be taxed until it is received in cash.The tax rate is 30%.What is the journal entry to record the tax effect?
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Question 18
Multiple Choice
A company has received €40 000 for subscription revenue in advance and recorded a liability account 'revenue received in advance'.Revenue is taxed when it is received.The tax rate is 30%.What is the tax base for this item?
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€0
€40 000
€12 000
€36 000
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Question 19
Multiple Choice
Sinfonia Plc made credit sales for this period of €100 000.The allowance for doubtful debts for these sales is €3000.For taxation purposes the amount provided for doubtful debts is not tax-deductible and the taxation office has included the €100 000 in taxable income.The tax rate is 30%.What is the deferral arising from this situation?
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none
deferred tax liability of €900
deferred tax asset of €900
deferred tax liability of €3000
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Question 20
Multiple Choice
Snifful Industries has a depreciable asset that is estimated for accounting purposes to have a useful life of 7 years.For taxation purposes the useful life is 3 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% and the cost of the asset is £210 000.What is the amount of the deferred tax liability account generated by this asset at the end of years 2,3 and 4?
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End of year 2: £24 000; year 3: £36 000; year 4: £27 000
End of year 2: £80 000; year 3: £120 000; year 4: £90 000
End of year 2: £12 000; year 3: £24 000; year 4: £36 000
End of year 2: £12 000; year 3: £12 000; year 4: £(9000)
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