Question 1

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } &\$\\\text { Interest revenue } & 500000 \\\text { Sales revenue } & 5000000 \\\text { Dividend revenue } & 1500000 \\\text { Depreciation expense } & 700000 \\\text { Wages and annual leave expense } & 1500000 \\\text { Other expense } & 3000000\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.

-What is Penguin Ltd's taxable income for the 20X9 year?

A)$300 000
B)$250 000
C)$600 000
D)$500 000

$500 000

Accepted Answer

Taxable income is calculated by adding up all assessable income and then subtracting allowable deductions. In this case, assessable income includes interest revenue ($500,000) and sales revenue ($5,000,000), totaling $5,500,000. Dividend revenue is not assessable. Allowable deductions include depreciation expense ($700,000), wages and annual leave expense ($1,500,000), and other expenses ($3,000,000), totaling $5,200,000. The annual leave paid is not deducted separately as it is part of the wages and annual leave expense. Therefore, taxable income is $5,500,000 - $5,200,000 = $300,000. However, considering the error in calculation, the correct approach to finding the taxable income should consider all given figures correctly, leading to a reevaluation of the calculation process.

Question 2

A taxable temporary difference always results in the recognition of a deferred tax liability.

Accepted Answer

False

Question 3

The amount of the current tax expense and income tax payable is determined by three things; (i) the aggregate of assessable income; (ii) the aggregate of allowable deductions; (iii) and the applicable tax rate.

Accepted Answer

This statement is true as the current tax expense and income tax payable are calculated based on the total assessable income, allowable deductions and the tax rate applicable to the entity.

Question 4

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } &\$\\\text { Interest revenue } & 500000 \\\text { Sales revenue } & 5000000 \\\text { Dividend revenue } & 1500000 \\\text { Depreciation expense } & 700000 \\\text { Wages and annual leave expense } & 1500000 \\\text { Other expense } & 3000000\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.

-What is Penguin Ltd's taxable income for the 20X9 year?

A)$300 000
B)$250 000
C)$600 000
D)$500 000

$500 000

Accepted Answer

The period profit or loss (accounting profit after tax) using the tax payable method is calculated as follows:Sales revenue + Interest revenue + Dividend revenue - Depreciation expense - Wages and annual leave expense - Other expense - Income tax expense$5,000,000 + $500,000 + $1,500,000 - $700,000 - $1,500,000 - $3,000,000 - $450,000 = $1,650,000The income tax expense is calculated as follows:(Sales revenue + Interest revenue + Dividend revenue - Depreciation expense - Wages and annual leave expense - Other expense) x Income tax rate($5,000,000 + $500,000 + $1,500,000 - $700,000 - $1,500,000 - $3,000,000) x 30% = $450,000

Question 5

What is the criteria for the recognition of a deferred tax asset (DTA) associated with a tax loss?&#10;A)it is probable that there will be sufficient future taxable profits against which to offset the loss&#10;B)it absolutely certain there will be sufficient future taxable profits against which to offset the loss&#10;C)AASB 112 prohibits recognition of DTAs for tax losses&#10;D)it is probable beyond any reasonable doubt there will be sufficient future taxable profits against which to offset the loss

Accepted Answer

According to AASB 112, a deferred tax asset associated with a tax loss is recognized if it is probable that there will be sufficient future taxable profits against which to offset the loss. "Probable" in this context means that there is a likelihood greater than 50%. Therefore, option A is correct as it aligns with the requirements of AASB 112. Option B is incorrect because certainty cannot be achieved in future events. Option C is incorrect as AASB 112 allows recognition of DTAs for tax losses under certain criteria. Option D is incorrect as it demands a higher degree of certainty than what is required by AASB 112.

Question 6

Sea Otter Ltd uses the revaluation model for all classes of property, plant and equipment. The following information relates to two items of nlant the CRM650 and DRM700

$\begin{array}{llcc} \text { } & \text { CRM650}& \text {DRM700} \\ \text {Cost (acquisition date $ 1 / 1 / 20 \mathrm{X} 1 $ ) } &\$5000000&\$8000000\\ \text { Useful life - taxation } &8\text {years}&8\text {years} \\ \text { Useful life - accounting } &10\text {years}&5\text {years}\\ \text { Fair value $ 36 / 06 / 20 \mathrm{X} 2 $ } &\$5400000&\$7500000\\ \text { } &\\\end{array}$

-For the DRM700, the revaluation on 30/06/20X2 results in:

A)a deferred tax expense and DTL of $150 000, and asset revaluation reserve decrement of $350 000
B)a deferred tax expense and DTL of $307 500, and asset revaluation reserve increment of $717 500
C)a deferred tax expense and DTL of $150 000, and asset revaluation reserve increment of $350 000
D)a taxable temporary difference of $500 000, asset revaluation reserve increment of $500 000 and a deferred tax expense and DTL of $150 000.

Accepted Answer

Under the revaluation model, the difference between the fair value and the carrying amount (cost less accumulated depreciation and impairment losses) is recognized in other comprehensive income (OCI) as an increment to the asset revaluation reserve (ARR).

For CRM650:

Increment to ARR = fair value - carrying amount = $5,400,000 - $4,000,000 (assume no accumulated depreciation) = $1,400,000

This increment to the ARR generates a taxable temporary difference (TTD) equal to $1,400,000 x 21% (tax rate) = $294,000. This means that, for tax purposes, the asset will be depreciated over a shorter period than for accounting purposes, resulting in lower taxable profits in the earlier years of the asset's life.

The DTL is calculated as the product of the TTD and the tax rate, which is $294,000 x 21% = $61,740.

The deferred tax expense equals the change in the DTL balance over the period, which is $61,740 - $0 (since there was no DTL balance at the beginning of the year) = $61,740.

The increment to the ARR is the net of the deferred tax expense and the DTL, which is $1,400,000 - $61,740 = $1,338,260. Therefore, the correct answer is B.

Question 7

Under the balance sheet approach, the income tax expense has two components: (i) the current tax expense (or current tax revenue) and (ii) the net deferred tax expense (or net deferred tax revenue).

Accepted Answer

The balance sheet approach for income tax expense includes both current tax expense (or revenue) and net deferred tax expense (or revenue).

Question 8

Under AASB 112 the following is true:&#10;A)taxable temporary difference produce deferred tax assets and deductible temporary differences produce deferred tax liabilities&#10;B)taxable temporary difference produce deferred tax liabilities and deductible temporary differences produce deferred tax assets&#10;C)carry forward tax losses produce deferred tax liabilities&#10;D)income tax is treated as an expropriation of profits not as an expense.

Accepted Answer

Under AASB 112, taxable temporary differences produce deferred tax liabilities and deductible temporary differences produce deferred tax assets. Carry forward tax losses do not produce deferred tax liabilities. Income tax is treated as an expense, not an expropriation of profits.

Question 9

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } &\$\\\text { Interest revenue } & 500000 \\\text { Sales revenue } & 5000000 \\\text { Dividend revenue } & 1500000 \\\text { Depreciation expense } & 700000 \\\text { Wages and annual leave expense } & 1500000 \\\text { Other expense } & 3000000\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.

-What is Penguin Ltd's taxable income for the 20X9 year?

A)$300 000
B)$250 000
C)$600 000
D)$500 000

$500 000

Accepted Answer

Step 1: Calculate assessable income
Assessable income = Interest revenue + Sales revenue = $500 000 + $5 000 000 = $5 500 000

Step 2: Calculate tax deductible expenses
Tax deductible expenses = Depreciation expense + Wages and annual leave expense + Other expense
= $700 000 + $300 000 + ($1 500 000 - $100 000) = $2 400 000

Step 3: Calculate taxable income
Taxable income = Assessable income - Tax deductible expenses = $5 500 000 - $2 400 000 = $3 100 000

Step 4: Calculate income tax expense
Income tax expense = Taxable income x Tax rate = $3 100 000 x 30% = $930 000

Step 5: Calculate Period profit or loss (accounting profit after tax)
Period profit or loss = Assessable income - Tax deductible expenses - Income tax expense = $5 500 000 - $2 400 000 - $930 000 = $1 170 000
Therefore, the correct answer is B) $1 710 000.

Question 10

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } &\$\\\text { Interest revenue } & 500000 \\\text { Sales revenue } & 5000000 \\\text { Dividend revenue } & 1500000 \\\text { Depreciation expense } & 700000 \\\text { Wages and annual leave expense } & 1500000 \\\text { Other expense } & 3000000\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.

-What is Penguin Ltd's taxable income for the 20X9 year?

A)$300 000
B)$250 000
C)$600 000
D)$500 000

$500 000

Accepted Answer

Taxable income = $5,000,000 - $700,000 - $1,500,000 + $300,000 - $3,000,000 = $1,100,000Tax payable = $1,100,000 x 30% = $330,000Less: Tax paid on annual leave paid = $100,000 x 30% = $30,000Tax payable = $330,000 - $30,000 = $300,000

Question 11

Sea Otter Ltd uses the revaluation model for all classes of property, plant and equipment. The following information relates to two items of nlant the CRM650 and DRM700

$\begin{array}{llcc} \text { } & \text { CRM650}& \text {DRM700} \\ \text {Cost (acquisition date $ 1 / 1 / 20 \mathrm{X} 1 $ ) } &\$5000000&\$8000000\\ \text { Useful life - taxation } &8\text {years}&8\text {years} \\ \text { Useful life - accounting } &10\text {years}&5\text {years}\\ \text { Fair value $ 36 / 06 / 20 \mathrm{X} 2 $ } &\$5400000&\$7500000\\ \text { } &\\\end{array}$

-For the CRM650, the revaluation on 30/06/20X2 results in:

A)a deductible temporary difference of $1 025 000 and a DTL of $307 500
B)a deferred tax expense and DTL of $307 500, and asset revaluation reserve increment of $717 500
C)a DTA of $307 500 and asset revaluation reserve increment of $717 500
D)asset revaluation reserve increment of $1 025 000 and a deferred tax expense and DTL of $307 500.

Accepted Answer

The answer of Sea Otter Ltd uses the revaluation model...

Question 12

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } &\$\\\text { Interest revenue } & 500000 \\\text { Sales revenue } & 5000000 \\\text { Dividend revenue } & 1500000 \\\text { Depreciation expense } & 700000 \\\text { Wages and annual leave expense } & 1500000 \\\text { Other expense } & 3000000\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.

-What is Penguin Ltd's taxable income for the 20X9 year?

A)$300 000
B)$250 000
C)$600 000
D)$500 000

$500 000

Accepted Answer

The answer of The following information was extracted from the...

Question 13

Temporary taxable difference result in the recognition of deferred tax assets.

Accepted Answer

The answer of Temporary taxable difference result in the recognition...

Question 14

Sea Otter Ltd uses the revaluation model for all classes of property, plant and equipment. The following information relates to two items of nlant the CRM650 and DRM700

$\begin{array}{llcc} \text { } & \text { CRM650}& \text {DRM700} \\ \text {Cost (acquisition date $ 1 / 1 / 20 \mathrm{X} 1 $ ) } &\$5000000&\$8000000\\ \text { Useful life - taxation } &8\text {years}&8\text {years} \\ \text { Useful life - accounting } &10\text {years}&5\text {years}\\ \text { Fair value $ 36 / 06 / 20 \mathrm{X} 2 $ } &\$5400000&\$7500000\\ \text { } &\\\end{array}$

-For the DRM700, the revaluation on 30/06/20X2 results in:

A)a deferred tax expense and DTL of $150 000, and asset revaluation reserve decrement of $350 000
B)a deferred tax expense and DTL of $307 500, and asset revaluation reserve increment of $717 500
C)a deferred tax expense and DTL of $150 000, and asset revaluation reserve increment of $350 000
D)a taxable temporary difference of $500 000, asset revaluation reserve increment of $500 000 and a deferred tax expense and DTL of $150 000.

Accepted Answer

The answer of Sea Otter Ltd uses the revaluation model...

Question 15

An increase in the expected future income tax rate will result in a reduction in the current period income tax expense if at reporting date the aggregate amount of DTAs is greater that aggregate DTLs.

Accepted Answer

The answer of An increase in the expected future income...

Question 16

A deferred tax expense can result from either a reduction in a deferred tax liability or an increase in a deferred tax asset.

Accepted Answer

The answer of A deferred tax expense can result from...

Question 17

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } &\$\\\text { Interest revenue } & 500000 \\\text { Sales revenue } & 5000000 \\\text { Dividend revenue } & 1500000 \\\text { Depreciation expense } & 700000 \\\text { Wages and annual leave expense } & 1500000 \\\text { Other expense } & 3000000\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.

-What is Penguin Ltd's taxable income for the 20X9 year?

A)$300 000
B)$250 000
C)$600 000
D)$500 000

$500 000

Accepted Answer

The answer of The following information was extracted from the...

Question 18

&#10;What is the amount of income tax payable?&#10;A)$510 000&#10;B)$600 000&#10;C)$690 000&#10;D)$675 000

Accepted Answer

The answer of  &#10;What is the amount of income...

Question 19

When the balance sheet approach to tax effect accounting is adopted:&#10;A)the income tax expense is measured by the aggregate change in the amounts of deferred tax assets and deferred tax liabilities over the reporting period&#10;B)the income tax expense can be greater than, or less than, the income tax payable for the reporting period&#10;C)the current tax expense is measured by the aggregate change in the amounts of deferred tax assets and deferred tax liabilities over the reporting period&#10;D)there will always be recognised deferred tax assets and deferred tax liabilities

Accepted Answer

The answer of When the balance sheet approach to tax...

Question 20

The following information was extracted from the accounting records of Penguin Pty Ltd for the year ended 30 June 20X9:
$\begin{array} { l r } &\$\\\text { Interest revenue } & 500000 \\\text { Sales revenue } & 5000000 \\\text { Dividend revenue } & 1500000 \\\text { Depreciation expense } & 700000 \\\text { Wages and annual leave expense } & 1500000 \\\text { Other expense } & 3000000\end{array}$
The company income tax rate is 30%.
The annual leave expense totaled $300 000, and $100 000 of annual leave was paid during the year.
The dividend revenue is not assessable income.

-What is Penguin Ltd's taxable income for the 20X9 year?

A)$300 000
B)$250 000
C)$600 000
D)$500 000

$500 000

Accepted Answer

The answer of The following information was extracted from the...

Question 21

Sea Otter Ltd uses the revaluation model for all classes of property, plant and equipment. The following information relates to two items of nlant the CRM650 and DRM700

$\begin{array}{llcc} \text { } & \text { CRM650}& \text {DRM700} \\ \text {Cost (acquisition date $ 1 / 1 / 20 \mathrm{X} 1 $ ) } &\$5000000&\$8000000\\ \text { Useful life - taxation } &8\text {years}&8\text {years} \\ \text { Useful life - accounting } &10\text {years}&5\text {years}\\ \text { Fair value $ 36 / 06 / 20 \mathrm{X} 2 $ } &\$5400000&\$7500000\\ \text { } &\\\end{array}$

-For the CRM650, the revaluation on 30/06/20X2 results in:

A)a deductible temporary difference of $1 025 000 and a DTL of $307 500
B)a deferred tax expense and DTL of $307 500, and asset revaluation reserve increment of $717 500
C)a DTA of $307 500 and asset revaluation reserve increment of $717 500
D)asset revaluation reserve increment of $1 025 000 and a deferred tax expense and DTL of $307 500.

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افتح القفل للوصول البطاقات البالغ عددها 21 في هذه المجموعة.

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k this deck

Accepted Answer

The answer of Sea Otter Ltd uses the revaluation model...

Deck 10: Income Tax