Exam 18: Accounting for Income Taxes

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?

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

AASB 112 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.

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

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

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

AASB 112 defines the tax base as the amount that is attributed to an asset or liability for tax purposes.

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% 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?

The amount of tax assessed by the ATO based on the entity's operations for the period will be reflected in which account?

Bogart Ltd has the following tax balances as at 30 June 2012: Deferred tax asset \ 450000 Deferred tax liability \ 150000 The balances were calculated when the tax rate was 30%.On 30 September 2012,the government announced a change to the company tax rate to 40%,effective immediately.What is the journal entry to adjust the carry-forward balances of the deferred tax asset and deferred tax liability?

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

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

How do deferred tax assets and deferred tax liabilities arise? How do you calculate their balances at a point in time?

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.

The amount of tax calculated based on the entity's operations for the period will be reflected in which account?

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

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

The balance sheet approach to accounting for taxation relies on comparing the historical cost of an item with its appropriate tax base.

When a non-current asset is revalued the tax base is not affected as depreciation for tax purposes will continue to be based on original cost.

The tax base is defined in AASB 112 as: