Question 1

AASB 112 uses what term to describe the method for accounting for taxes that it mandates?

Accepted Answer

A)   Net balances method.
B)   Financial position method.
C)   Asset and liability method.
D)   Balance sheet method.
E)   None of the given answers.

Question 2

The generally accepted (a) accounting rule,and (b) tax rule; for development expenditure,are ......:

Accepted Answer

A)   Capitalise and amortise; (b)  A tax deduction when paid for.
B)   Expense when paid for; (b)  A tax deduction when paid for.
C)   Capitalise and amortise; (b)  A tax deduction when amortised.
D)   Expense when paid for; (b)  A tax deduction when amortised.
E)   Capitalise and amortise; (b)  A tax deduction when impaired. A

Question 3

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 per cent.What is the tax base for this item?

Accepted Answer

A)   $0
B)   $40,000
C)   $12,000
D)   $36,000
E)   None of the given answers.

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

Permanent differences:

Accepted Answer

A)   arise due to differences between income tax legislation and accounting rules, in a particular period, and are reversed in subsequent periods.
B)   are accounted for by creating and/or passing entries through to "Deferred Tax Assets" and "Deferred Tax Liabilities" accounts.
C)   must be considered, and accounted for, by the creation of deferred tax asset and liabilities for all balance sheet items (e.g., including asset revaluations) , rather than just income statement items, which is a major change created by the new standard.
D)   arise due to differences between income tax legislation and accounting rules, in a particular period, and are reversed in subsequent periods; are accounted for by creating and/or passing entries through to "Deferred Tax Assets" and "Deferred Tax Liabilities" accounts; must be considered, and accounted for, by the creation of deferred tax asset and liabilities for all balance sheet items (e.g., including asset revaluations) , rather than just income statement items, which is a major change created by the new standard
E)   None of the given answers.

Question 6

To be a member of a "tax consolidated group":

Accepted Answer

A)   Associates must be Australian residents
B)   Subsidiaries must be Australian residents
C)   Subsidiaries must be majority owned by the parent company.
D)   Subsidiaries must be Australian residents and subsidiaries must be majority owned by the parent company.
E)   None of the given answers.

Question 7

Tissues Ltd has a depreciable asset that is estimated for accounting purposes to have a useful life of 8 years.For taxation purposes the useful life is 5 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 $100,000.What is the amount of the deferred tax liability account generated by this asset at the end of years 1,2 and 3?

Accepted Answer

A)   End of year 1: $0; Year 2: $2,250; Year 3: $4,500
B)   End of year 1: $7,500; Year 2: $15,000; Year 3: $22,500
C)   End of year 1: $6,750; Year 2: $4,500; Year 3: $2,250
D)   End of year 1: $2,250; Year 2: $4,500; Year 3: $6,750
E)   None of the given answers.

Question 8

The carrying amount of deferred tax assets and deferred tax liabilities can change:

Accepted Answer

A)   With a change in the amount of the related temporary differences.
B)   Even if there is no change in the amount of the related temporary differences.
C)   A re-assessment of the recoverability of deferred tax liabilities.
D)   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.
E)   All of the given answers.

Question 9

According to AASB 112,with one exception,the tax base of a liability is to be determined in the following manner,
Carrying amount - Future deductible amount + Future assessable amount:

Accepted Answer

A) True 
 B)False

Question 10

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 11

The correct method for calculating the amount of a deferred tax liability or asset may be expressed as a formula as follows:

Accepted Answer

A)   (Carrying amount of assets or liabilities - tax bases of assets or liabilities)  * tax rate.
B)   Carrying amount of assets or liabilities - (tax bases of assets or liabilities * tax rate) .
C)   Carrying amount of assets or liabilities - tax bases of assets or liabilities * tax rate.
D)   Carrying amount of assets or liabilities - tax bases of assets or liabilities.
E)   None of the given answers.

Question 12

The tax base is defined in AASB 112 as:

Accepted Answer

A)   The amount of assessable income for the period.
B)   The tax rate applicable to income levels under $60,000.
C)   The amount that is attributed to an asset or liability for tax purposes.
D)   The head office of the Australian Taxation Office in Canberra.
E)   None of the given answers. C

Question 13

When a non-current asset is revalued,the recognition of future tax associated with an asset that has a fair value in excess of cost,acts to reduce the amount of the revaluation reserve:

Accepted Answer

A) True 
 B)False

Question 14

The AASB 112 approach has been adopted because:

Accepted Answer

A)   It matches the revenues earned with tax payable on those revenues.
B)   It is conservative.
C)   It is considered consistent with the AASB framework.
D)   It is considered acceptable by the Tax Office.
E)   None of the given answers.

Question 15

Sinfonia Ltd made credit sales for this period of $100,000.The allowance for doubtful debts for these sales is $3,000.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 per cent.What is the deferral arising from this situation?

Accepted Answer

A)   None.
B)   Deferred tax liability of $900
C)   Deferred tax asset of $900
D)   Deferred tax liability of $3,000
E)   Deferred tax asset of $3,000.

Question 16

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 per cent 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?

Accepted Answer

A)   End of year 2: $24,000; Year 3: $36,000; Year 4: $27,000
B)   End of year 2: $80,000; Year 3: $120,000; Year 4: $90,000
C)   End of year 2: $12,000; Year 3: $24,000; Year 4: $36,000
D)   End of year 2: $12,000; Year 3: $12,000; Year 4: $(9,000) 
E)   None of the given answers. A

Question 17

What is the accounting treatment for goodwill that is consistent with AASB 112 "Income Taxes"?

Accepted Answer

A)   Treated as a deductible expense in the year of recognition.
B)   Treated as a non-deductible expense in the year of recognition and subsequent periods.
C)   The difference between the carrying amount and the tax base results to a taxable temporary difference.
D)   The difference between the carrying amount and the tax base results to a deductible temporary difference.
E)   The deductible temporary difference results to a deferred tax asset.

Question 18

Some items are typically not allowable tax deductions but are recognised as an expense for accounting purposes.Which of the following items are of that type?

Accepted Answer

A)   Research and development costs.
B)   Warranty costs.
C)   Sick leave payments.
D)   Goodwill amortisation.
E)   None of the given answers.

Question 19

Which of the following statements is not correct in relation to tax rate changes?

Accepted Answer

A)   An increase in tax rates will create an expense where an entity has deferred tax liabilities.
B)   Across time it is likely that governments will change tax rates.
C)   A decrease in tax rates will create an income where an entity has deferred tax assets.
D)   Changes tax rates will have implications for the value attributed to pre-existing deferred tax assets
E)   Deferred tax arising from changes to tax rates is recognised in either the income statement or to equity (if they had been previously charged to equity) .

Question 20

Profit for taxation purposes is determined in accordance with Australian Accounting Standards,AASB 112:

Accepted Answer

A) True 
 B)False

Exam 19: Accounting for Income Taxes

AASB 112 uses what term to describe the method for accounting for taxes that it mandates?

Correct Answer
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The generally accepted (a) accounting rule,and (b) tax rule; for development expenditure,are ......:

Correct Answer
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A

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 per cent.What is the tax base for this item?

Correct Answer
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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.

Correct Answer
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Permanent differences:

Correct Answer
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To be a member of a "tax consolidated group":

Correct Answer
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Correct Answer
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The carrying amount of deferred tax assets and deferred tax liabilities can change:

Correct Answer
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According to AASB 112,with one exception,the tax base of a liability is to be determined in the following manner, Carrying amount - Future deductible amount + Future assessable amount:

Correct Answer
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Correct Answer
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The correct method for calculating the amount of a deferred tax liability or asset may be expressed as a formula as follows:

Correct Answer
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The tax base is defined in AASB 112 as:

Correct Answer
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C

When a non-current asset is revalued,the recognition of future tax associated with an asset that has a fair value in excess of cost,acts to reduce the amount of the revaluation reserve:

Correct Answer
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The AASB 112 approach has been adopted because:

Correct Answer
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Correct Answer
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Correct Answer
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A

What is the accounting treatment for goodwill that is consistent with AASB 112 "Income Taxes"?

Correct Answer
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Some items are typically not allowable tax deductions but are recognised as an expense for accounting purposes.Which of the following items are of that type?

Correct Answer
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Which of the following statements is not correct in relation to tax rate changes?

Correct Answer
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Profit for taxation purposes is determined in accordance with Australian Accounting Standards,AASB 112:

Correct Answer
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Exam 19: Accounting for Income Taxes

AASB 112 uses what term to describe the method for accounting for taxes that it mandates?

Correct AnswerverifiedShow Answer

The generally accepted (a) accounting rule,and (b) tax rule; for development expenditure,are ......:

Correct AnswerverifiedA

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 per cent.What is the tax base for this item?

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Permanent differences:

Correct AnswerverifiedShow Answer

To be a member of a "tax consolidated group":

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The carrying amount of deferred tax assets and deferred tax liabilities can change:

Correct AnswerverifiedShow Answer

According to AASB 112,with one exception,the tax base of a liability is to be determined in the following manner, Carrying amount - Future deductible amount + Future assessable amount:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The correct method for calculating the amount of a deferred tax liability or asset may be expressed as a formula as follows:

Correct AnswerverifiedShow Answer

The tax base is defined in AASB 112 as:

Correct AnswerverifiedC

When a non-current asset is revalued,the recognition of future tax associated with an asset that has a fair value in excess of cost,acts to reduce the amount of the revaluation reserve:

Correct AnswerverifiedShow Answer

The AASB 112 approach has been adopted because:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

What is the accounting treatment for goodwill that is consistent with AASB 112 "Income Taxes"?

Correct AnswerverifiedShow Answer

Some items are typically not allowable tax deductions but are recognised as an expense for accounting purposes.Which of the following items are of that type?

Correct AnswerverifiedShow Answer

Which of the following statements is not correct in relation to tax rate changes?

Correct AnswerverifiedShow Answer

Profit for taxation purposes is determined in accordance with Australian Accounting Standards,AASB 112:

Correct AnswerverifiedShow Answer

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A

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C

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A

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