ABC Limited has an asset with a carrying value of €50 000. The tax base of this asset is €40 000. The tax rate is 30%. As a result, which of the following deferred tax items does Roland Limited have?
A) A deferred tax asset of €10 000;
B) A deferred tax liability of €3000;
C) A deferred tax liability of €10 000;
D) A deferred tax asset of €3000.

Question

Quizplus · Accepted Answer

A deferred tax liability arises because the carrying amount of the asset (€50,000) is greater than its tax base (€40,000), resulting in a temporary difference of €10,000. The tax rate is 30%, so the deferred tax liability is 30% of €10,000, which equals €3,000.

ABC Limited Has an Asset with a Carrying Value of €50