Page 508 - F2 Integrated Workbook STUDENT 2019

F2: Advanced Financial Reporting

CHAPTER 9 – DEFERRED TAX

9.1 Which of the following statements regarding IAS 12 Income Taxes is
false?

A Deferred tax is created due to temporary differences between the
accounting treatment and the taxation treatment of a particular transaction.

B If the carrying amount is greater than the tax base a deferred tax asset will
be created.

C Accelerated capital allowances will create deferred tax liabilities.

D Trading losses that can be carried forward to offset against expected
future profits will create deferred tax assets.

9.2 Which of the following transactions does not create any tax temporary
differences?

A Revalued PPE

B Entertaining expenses that are not allowable for tax purposes

C Accelerated capital allowances

D Development costs which are allowable for tax as incurred

9.3 JS bought a machine for $500,000 on 1st September 20X6. JS depreciates the
asset over its useful economic lifetime of 10 years. Capital allowances are
granted on a 25% reducing balance basis.

The applicable tax rate is 24%.

What is the double entry required for the deferred tax arising within the
year ended 31st August 20X8? Answers are given to the nearest $000’s.

A Dr P/L 11 Cr Deferred tax liability 11

B Dr Revaluation reserve 11 Cr Deferred tax liability 11

C Dr P/L 18 Cr Deferred tax liability 18

D Dr Revaluation Reserve 18 Cr Deferred tax liability 18

500