2103AFE Company Accounting

Week 1
Multiple Choice Questions

1. The tax expense related to profit or loss of the period is required to be

presented:

a. on the face of the statement of financial position

b. on the face of the statement of profit or loss and other
comprehensive income
c. in the statement of cash flows
d. in the statement of changes in equity

2. Generally, when considering the differences between the accounting

treatment and the income tax treatment of a particular item the accounting
treatment is based on:

a. cash flows
b. the income tax legislation
c. cash flows adjusted for depreciation charges
d. accrual accounting and is subject to the requirements of
accounting standards

3. The following information was extracted from the financial records of Panda
Limited: equipment purchased on 1 July 2014 for $140 000 (accounting
depreciation 10% straight line; tax depreciation 20% straight line). If the
company tax rate is 30%, the deferred tax item that will be recorded by
Panda Limited at 30 June 2015 is which of the following?

a. Dr Deferred tax asset $14 000

b. Cr Deferred tax asset $4200
c. Dr Deferred tax liability $14 000
d. Cr Deferred tax liability $4200

4. Differences between the carrying amounts of an entitys net assets

determined under accounting standards and accrual accounting, and the
tax bases of those net assets determined under the Income Tax Assessment
Act, are described as:

a. tax losses
b. temporary differences
c. permanent differences
d. the current income tax liability

5. A taxable temporary difference is expected to lead to the payment of:

a. less tax in the future and gives rise to a deferred tax asset
b. more tax in the future and gives rise to a deferred tax asset
c. less tax in the future and gives rise to a deferred tax liability

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d. more tax in the future and gives rise to a deferred tax liability

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6. A deductible temporary difference is expected to lead to the payment of:

a. less tax in the future and gives rise to a deferred tax asset
b. more tax in the future and gives rise to a deferred tax asset
c. less tax in the future and gives rise to a deferred tax liability
d. more tax in the future and gives rise to a deferred tax liability

7. CTV Limited has an asset which cost $400 and against which depreciation of
$200 has accumulated. The accumulated depreciation for tax purposes is
$280 and the company tax rate is 30%. The tax base of this asset is:

a. $36
b. $320
c. $120
d. $80

8. Silver Bullet Limited has a product warranty liability amounting to $12 000.
The product warranty costs are not tax deductible until paid out to
customers. The company tax rate is 30%. The company has a:

a. tax base of $12 000

b. future deductible amount of $0
c. taxable temporary difference of $12 000
d. deductible temporary difference of $12 000

9. Sydney Limited accrued $20 000 for employees long service leave in the
year ended 30 June 2015. This item will not be tax deductible until it is paid
in approximately 10 years time. If the company tax rate is 30%, Sydney
Limited must record which of the following tax effects as a balance date
adjustment?

a. Dr Deferred tax asset $6000

b. Cr Deferred tax asset $6000
c. Dr Deferred tax liability $6000
d. Cr Deferred tax liability $6000

10. Unless a company has a legal right of set-off, AASB 112 Income Taxes,
requires disclosure of which of the following information for deferred tax
statement of financial position items?
I. The amount of deferred tax assets recognised.
II. The amount of the deferred tax liabilities recognised.
III. The net amount of the deferred tax assets and liabilities recognised.
IV. The amount of the deferred tax asset relating to tax losses.

a. I, II and IV only
b. I, II and III only
c. III and IV only
d. IV only