Question 1

Under AASB 112,where the carrying amount of an asset is less than the amount that is economically recoverable,the deferred tax asset should be adjusted.

Accepted Answer

A) True 
 B)False

Question 2

A taxable temporary difference is one that will result in:

Accepted Answer

A)   An increase in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
B)   A decrease in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
C)   An increase in income tax recoverable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
D)   A decrease in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled and an increase in income tax recoverable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
E)   None of the given answers.

Question 3

Lesser Ltd is wholly owned by Moore Ltd.In the current year Lesser Ltd has made a tax loss of $200,000 and Moore Ltd has made a profit of $300,000.It is expected that Lesser Ltd will make sufficient profits in the future to utilise the benefits of the tax loss,so Lesser has recorded a deferral for the loss.Moore pays Lesser $10,000 consideration for the transfer of the tax loss.Neither Moore nor Lesser have elected to be part of a tax consolidated group.The taxation rate is 30 per cent.What are the appropriate entries to record the transfer (only) ?

Accepted Answer

A)   
B)   
C)   
D)   
E)   None of the given answers.

Question 4

Some items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes.Which of the following items are of that type?

Accepted Answer

A)   Long service leave.
B)   Goodwill amortisation.
C)   Depreciation.
D)   Entertainment.
E)   All of the given answers.

Question 5

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 6

The criteria for recognising a deferred tax asset is:

Accepted Answer

A)   That it should be fully recognised if it is probable that future taxable amounts within the entity will be available against which the deductible temporary differences can be utilised.
B)   That it should be recognised if it is possible that future taxable amounts within the entity will be available against which the deductible temporary differences can be utilised.
C)   That it should be recognised to the extent, and only to the extent, that it is possible that future taxable amounts within the entity will be available against which the deductible temporary differences can be utilised.
D)   That it should be recognised to the extent, and only to the extent, that it is probable that future taxable amounts within the entity will be available against which the deductible temporary differences can be utilised.
E)   None of the given answers.

Question 7

Deferred tax assets may arise from amounts of income taxes recoverable in future periods that arise from carry forward of unused tax losses.

Accepted Answer

A) True 
 B)False

Question 8

A deductible temporary difference is one that will result in:

Accepted Answer

A)   A decrease in income tax recoverable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
B)   An increase in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
C)   A decrease in income tax recoverable in future reporting periods when the carrying amount of the asset or liability is recovered or settled and an increase in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
D)   A decrease in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
E)   None of the given answers.

Question 9

Non-deductible expenses results to a deferred tax asset.

Accepted Answer

A) True 
 B)False

Question 10

It is possible for a firm to legally make a large accounting profit but pay little or no tax based on its taxable income:

Accepted Answer

A) True 
 B)False

Question 11

The balance sheet approach adopted in AASB 112:

Accepted Answer

A)   Will continue to be used as the alternatives are too simplistic.
B)   Will only be understood by the very sophisticated financial readers.
C)   Uses existing balance sheet data thus reducing record keeping costs.
D)   Will only be understood by the very sophisticated financial readers and uses existing balance sheet data thus reducing record keeping costs.
E)   None of the given answers.

Question 12

The tax figure calculated and recorded on the income statement is an accurate reflection of the entity's tax liability for the stated period.

Accepted Answer

A) True 
 B)False

Question 13

Under AASB 112's approach to accounting for income taxes,a taxable temporary difference creates which account?

Accepted Answer

A)   Provision for tax payable.
B)   Deferred tax asset.
C)   General reserve.
D)   Deferred tax liability.
E)   None of the given answers.

Question 14

Under AASB 112's approach to accounting for income taxes,a deductible temporary difference creates which account?

Accepted Answer

A)   Deferred tax revenue.
B)   Deferred tax liability.
C)   Deferred tax asset.
D)   Provision for tax payable.
E)   None of the given answers.

Question 15

Which of the following statements is correct with respect to AASB 112 "Income Taxes" when a non-current asset is revalued?

Accepted Answer

A)   On revaluation date, the revaluation reserve is increased by the product of the temporary difference and the tax rate.
B)   On revaluation date, the revaluation reserve is decreased by the product of the temporary difference and the tax rate.
C)   On revaluation date, a deferred tax liability is created equal to the amount of the temporary difference.
D)   On revaluation date, a deferred tax asset is created equal to the amount of the temporary difference.
E)   None of the given answers

Question 16

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.

Exam 19: Accounting for Income Taxes

Deferred tax assets may arise from amounts of income taxes recoverable in future periods that arise from carry forward of unused tax losses.

Correct Answer
verified

The tax figure calculated and recorded on the income statement is an accurate reflection of the entity's tax liability for the stated period.

Correct Answer
verified

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
verified

Correct Answer
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A deductible temporary difference is one that will result in:

Correct Answer
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Under AASB 112's approach to accounting for income taxes,a taxable temporary difference creates which account?

Correct Answer
verified

The balance sheet approach adopted in AASB 112:

Correct Answer
verified

The criteria for recognising a deferred tax asset is:

Correct Answer
verified

Under AASB 112,where the carrying amount of an asset is less than the amount that is economically recoverable,the deferred tax asset should be adjusted.

Correct Answer
verified

Correct Answer
verified

It is possible for a firm to legally make a large accounting profit but pay little or no tax based on its taxable income:

Correct Answer
verified

A taxable temporary difference is one that will result in:

Correct Answer
verified

Some items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes.Which of the following items are of that type?

Correct Answer
verified

Under AASB 112's approach to accounting for income taxes,a deductible temporary difference creates which account?

Correct Answer
verified

Non-deductible expenses results to a deferred tax asset.

Correct Answer
verified

Which of the following statements is correct with respect to AASB 112 "Income Taxes" when a non-current asset is revalued?

Correct Answer
verified

Exam 19: Accounting for Income Taxes

Deferred tax assets may arise from amounts of income taxes recoverable in future periods that arise from carry forward of unused tax losses.

Correct AnswerverifiedShow Answer

The tax figure calculated and recorded on the income statement is an accurate reflection of the entity's tax liability for the stated period.

Correct AnswerverifiedShow Answer

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

A deductible temporary difference is one that will result in:

Correct AnswerverifiedShow Answer

Under AASB 112's approach to accounting for income taxes,a taxable temporary difference creates which account?

Correct AnswerverifiedShow Answer

The balance sheet approach adopted in AASB 112:

Correct AnswerverifiedShow Answer

The criteria for recognising a deferred tax asset is:

Correct AnswerverifiedShow Answer

Under AASB 112,where the carrying amount of an asset is less than the amount that is economically recoverable,the deferred tax asset should be adjusted.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

It is possible for a firm to legally make a large accounting profit but pay little or no tax based on its taxable income:

Correct AnswerverifiedShow Answer

A taxable temporary difference is one that will result in:

Correct AnswerverifiedShow Answer

Some items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes.Which of the following items are of that type?

Correct AnswerverifiedShow Answer

Under AASB 112's approach to accounting for income taxes,a deductible temporary difference creates which account?

Correct AnswerverifiedShow Answer

Non-deductible expenses results to a deferred tax asset.

Correct AnswerverifiedShow Answer

Which of the following statements is correct with respect to AASB 112 "Income Taxes" when a non-current asset is revalued?

Correct AnswerverifiedShow Answer

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