Question 1

Discuss the accounting treatment for the temporary difference that arises from revaluation of non-current assets.

Accepted Answer

IAS 12 requires that,to the extent that

Question 2

When the carrying amount of an asset exceeds its tax base,the amount that will be allowed as a deduction for tax purposes will exceed the amount of assessable economic benefits.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Explain,with examples,how changes in tax rates affect pre-existing deferred tax asset and deferred tax liability balances.

Accepted Answer

Across time it is likely that government

Question 5

The accounting profit multiplied by the tax rate is known as:

Accepted Answer

A) income tax payable 
B) income tax expense 
C) taxable amount 
D) assessable amount 
A) income tax payable 
B) income tax expense 
C) taxable amount 
D) assessable amount

Question 6

Evaluate deferred tax assets and deferred tax liabilities in terms of the IASB Conceptual Framework and the notion that they fail to meet the criteria outlined in the Framework.

Accepted Answer

Consider whether the asset 'deferred tax

Question 7

The difference between the carrying amount of an asset or liability in the balance sheet and its tax base is a temporary difference.

Accepted Answer

A) True 
 B)False

Question 8

Evaluate deferred tax assets and deferred tax liabilities in terms of the IASB Conceptual Framework and the notion that they fail to meet the criteria outlined in the Framework.

Accepted Answer

Consider whether the asset 'deferred tax

Question 9

The balance sheet approach compares the carrying value with the tax base of the assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 10

There are two types of temporary differences between the carrying value of assets and liabilities and the tax base-assessable temporary differences and neutral temporary differences.

Accepted Answer

A) True 
 B)False

Question 11

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. 
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.

Question 12

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 13

Deferred tax assets arise as a result of tax losses.Losses incurred in previous years can always be carried forward to offset taxable income derived in future years.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

IAS 12 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 
A) net balances method 
B) financial position method 
C) asset and liability method 
D) balance sheet method

Question 16

IAS 12 required an entity to offset current tax assets and current tax liabilities if the entity intends to realise the asset and settle the liability simultaneously.

Accepted Answer

A) True 
 B)False

Question 17

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%.

Accepted Answer

A)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Deferred tax asset } & \$ 1000 & \
\hline \mathrm{Cr} & \text { Income taxation expense } & & \$ 1000\
\hline
\end{array}$ 
B)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Income taxation expense } & \$ 1000 & \
\hline \mathrm{Cr} & \text { Deferred tax liability } & & \$ 1000 \
\hline
\end{array}$ 
C)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Deferred tax asset } & \$ 300 & \
\hline \mathrm{Cr} & \text { Income taxation expense } & & \$ 300 \
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Income taxation expense } & \$ 300 & \
\hline \mathrm{Cr} & \text { Deferred tax liability } & & \$ 300 \
\hline
\end{array}$ 
A)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Deferred tax asset } & \$ 1000 & \
\hline \mathrm{Cr} & \text { Income taxation expense } & & \$ 1000\
\hline
\end{array}$ 
B)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Income taxation expense } & \$ 1000 & \
\hline \mathrm{Cr} & \text { Deferred tax liability } & & \$ 1000 \
\hline
\end{array}$ 
C)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Deferred tax asset } & \$ 300 & \
\hline \mathrm{Cr} & \text { Income taxation expense } & & \$ 300 \
\hline
\end{array}$ 
D)  $\begin{array}{|l|l|r|r|}
\hline30 june2013\
\hline \mathrm{Dr} & \text { Income taxation expense } & \$ 300 & \
\hline \mathrm{Cr} & \text { Deferred tax liability } & & \$ 300 \
\hline
\end{array}$

Question 18

The balance sheet approach compares the carrying value with the tax base of the assets and liabilities.

Accepted Answer

A) True 
 B)False

Question 19

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?

Accepted Answer

A)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & & \
\hline \mathrm { Dr } & \text { Deferred tax asset } & \$ 500000 & \
\hline \mathrm { Cr } & \text { Income tax expense } & & \$ 500000 \
\hline 2015 & & \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 700000 & \
\hline \mathrm { Cr } & \text { Deferred tax asset } & \$ 500000 & \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 200000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & &  \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 150000 & \
\hline \mathrm { Cr } & \text { Income tax revenue } & & \$ 150000 \
\hline 2015 & &  \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 210000 & \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 210000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & & \
\hline \mathrm { Dr } & \text { Deferred tax asset } & \$ 150000 & \
\hline \mathrm { Cr } & \text { Income tax revenue } & & \$ 150000 \
\hline 2015 & &  \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 210000 & \
\hline \mathrm { Cr } & \text { Deferred tax asset } & & \$ 150000 \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 60000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & & \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 500000 & \
\hline \mathrm { Cr } & \text { Deferred tax liability } & & \$ 500000 \
\hline 2015 & & \
\hline \mathrm { Dr } & \text { Deferred tax liability } & \$ 500000 & \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 200000 & \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 700000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & & \
\hline \mathrm { Dr } & \text { Deferred tax asset } & \$ 500000 & \
\hline \mathrm { Cr } & \text { Income tax expense } & & \$ 500000 \
\hline 2015 & & \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 700000 & \
\hline \mathrm { Cr } & \text { Deferred tax asset } & \$ 500000 & \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 200000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & &  \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 150000 & \
\hline \mathrm { Cr } & \text { Income tax revenue } & & \$ 150000 \
\hline 2015 & &  \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 210000 & \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 210000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & & \
\hline \mathrm { Dr } & \text { Deferred tax asset } & \$ 150000 & \
\hline \mathrm { Cr } & \text { Income tax revenue } & & \$ 150000 \
\hline 2015 & &  \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 210000 & \
\hline \mathrm { Cr } & \text { Deferred tax asset } & & \$ 150000 \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 60000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | l | r | r | } 
\hline 2014 & & \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 500000 & \
\hline \mathrm { Cr } & \text { Deferred tax liability } & & \$ 500000 \
\hline 2015 & & \
\hline \mathrm { Dr } & \text { Deferred tax liability } & \$ 500000 & \
\hline \mathrm { Dr } & \text { Income tax expense } & \$ 200000 & \
\hline \mathrm { Cr } & \text { Tax payable } & & \$ 700000 \
\hline
\end{array}$$

Question 20

Discuss the criteria for recognising deferred tax assets when there are unused tax losses?

Accepted Answer

Consistent with the test for deferred ta

Exam 15: Accounting for Income Taxes

Discuss the accounting treatment for the temporary difference that arises from revaluation of non-current assets.

When the carrying amount of an asset exceeds its tax base,the amount that will be allowed as a deduction for tax purposes will exceed the amount of assessable economic benefits.

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.

Explain,with examples,how changes in tax rates affect pre-existing deferred tax asset and deferred tax liability balances.

The accounting profit multiplied by the tax rate is known as:

Evaluate deferred tax assets and deferred tax liabilities in terms of the IASB Conceptual Framework and the notion that they fail to meet the criteria outlined in the Framework.

The difference between the carrying amount of an asset or liability in the balance sheet and its tax base is a temporary difference.

Evaluate deferred tax assets and deferred tax liabilities in terms of the IASB Conceptual Framework and the notion that they fail to meet the criteria outlined in the Framework.

The balance sheet approach compares the carrying value with the tax base of the assets and liabilities.

There are two types of temporary differences between the carrying value of assets and liabilities and the tax base-assessable temporary differences and neutral temporary differences.

A deductible temporary difference is one that will result in:

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

Deferred tax assets arise as a result of tax losses.Losses incurred in previous years can always be carried forward to offset taxable income derived in future years.

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

IAS 12 uses what term to describe the method for accounting for taxes that it mandates?

IAS 12 required an entity to offset current tax assets and current tax liabilities if the entity intends to realise the asset and settle the liability simultaneously.

The balance sheet approach compares the carrying value with the tax base of the assets and liabilities.

Discuss the criteria for recognising deferred tax assets when there are unused tax losses?

An Overview of the International External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, Plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

An Overview of Accounting for Liabilities

Accounting for Leases

Share Capital, Reserves and Share Options Employee Bonus Schemes

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

The Statement of Cash Flows

Events Occurring After the Reporting Date

Related-Party Disclosures

Earnings Per Share

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues III: Accounting for Indirect Ownership Interest

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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