wk5 tut sols - Tutorial Week 5 Homework Chapter 6 Accounting for income tax REVIEW QUESTIONS 1 Outline the different treatments for accounting and tax

wk5 tut sols - Tutorial Week 5 Homework Chapter 6...

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Tutorial Week 5 Homework 1 Chapter 6: Accounting for income tax REVIEW QUESTIONS 1. Outline the different treatments for accounting and tax purposes of the following items: (a) depreciation of non-current assets (b) goodwill (c) long-service leave payable (d) allowance for doubtful debts (e) entertainment costs (f) prepaid insurance (g) warranties liability (h) rent received in advance. (a) The accounting treatment for depreciation as per AASB 116 is to allocate the depreciable amount of the asset on a systematic basis over the asset’s useful life. The tax treatment is based on a set of rates provided by the tax office which is usually different to the accounting depreciation rates. (b) Purchased goodwill is for accounting purposes recognised and then tested for impairment. For tax purposes, write-downs of goodwill are not allowed as a deduction. Note AASB 112 provides an exclusion in this regard to temporary differences. (See 6.4.3 of text). (c) Long service leave is an accounting expense that is recognised as it is incurred, however, for tax purposes it is only recognised as an allowable deduction when the leave is actually taken by an employee and paid in cash. (d) Doubtful/bad debts are recognised as an accounting expense when the likelihood
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