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B is not correct because the calculation subtracted

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B is not correct because the calculation subtracted the tax depreciation and added back fines to accountingprofit before tax to arrive at taxable profit. The calculation did not add back accounting depreciation.C is not correct because this calculation took accounting profit before tax to equal taxable profit and multipliedthis by the tax rate. It did not add back fines and accounting depreciation and subtract tax depreciation.Question 30 marksWhich of the following is the correct calculation of deferred tax?A. Carrying amount - tax baseB. Temporary difference x tax rateC. Taxable temporary difference x tax lossD. Current tax + deductible temporary differenceNo option was selected. This is incorrect.TOTAL MARKS : 1MARKS OBTAINEDUNMARKEDB is correct as to calculate the deferred tax, the temporary difference is multiplied by the tax rate. Temporarydifferences arise when the carrying amount of the asset or liability differs from the tax base.
Question 40 marksEntity A has an accounting profit of $300,000 and a taxable profit of $350,000.During the year, a plant with a cost of $100,000 was depreciated at a rate of 20% for accounting purposes and at arate of 25% for tax purposes.The entity also expensed a parking fine of $2,000.The tax rate is 30%What is the amount of tax expense that will be reflected in the Statement of Comprehensive income for the year?A. $89,100B. $104,100C. $105,000D. $106,500No option was selected. This is incorrect.TOTAL MARKS : 1MARKS OBTAINEDUNMARKEDD is correct and the calculations to support this are as follows:Tax expense = current tax + deferred tax expense - deferred tax incomeCurrent tax = taxable profit x tax rate350,000 x 30% = 105,000Deferred taxCATBTDDT(20,000)(25,000)5,0001,500Tax expense = 105,000 + 1,500= 106,500
Question 50 marksEntity B purchased an asset for $200 000 three years ago and accounts for the asset in terms of the revaluationmodel.The asset is depreciated on a straight-line basis over 8 years for accounting purposes and over 10 years for taxpurposes.The asset has a CGT cost base of $220 000 and CGT is applicable. At the end of year 3, the asset has a fair valueof $140,000.If management intend to sell the asset, what would be the tax base at the end of year 3?A. $125,000B. $140,000C. $154,000D. $160,000No option was selected. This is incorrect.TOTAL MARKS : 1MARKS OBTAINEDUNMARKEDD is correct as shown in the following calculations:Carrying amount = new revalued amount = $140,000Future deductible amounts = $220,000 - [($200,000/10 years useful tax life) x 3 years to accumulate dep] =$160,000Note: since the asset is going to be recovered through sale, the CGT base cost ($220,000) is used in thecalculation of future deductible amounts.Tax base = Carrying amount + Future deductible amounts - Future taxable amountsTax base = $140,000 + $160,000 - $140,000Tax base = $160,000
Question 60 marksThe balance sheet of Entity C included income received in advance with a balance of $30 000.The amount comprised interest income of $20 000 and rentals from a tenant of $10 000.

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Term
Fall
Professor
Staff
Tags
Balance Sheet, Generally Accepted Accounting Principles, International Financial Reporting Standards, International Financial Reporting

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