On 1 January 2012,William Bay Ltd purchased a machine for $100 000.The entity adopts a straight-line depreciation method and uses 10% and 15% as depreciation rate and tax rate respectively.The salvage value is zero and the tax rate is 30%. At 31 December 2012,which of the following statements is correct with respect to the transaction that is in accordance with AASB 112 Income Taxes only?

Question

Quizplus · Accepted Answer

The carrying amount of the machine at the end of the year is $90,000 ($100,000 cost - $10,000 depreciation). The tax base of the machine at the end of the year is $95,000 ($100,000 cost - $5,000 deductible temporary difference due to different depreciation methods used for tax and accounting purposes). Therefore, there is a taxable temporary difference of $5,000 ($95,000 tax base - $90,000 carrying amount).

On 1 January 2012,William Bay Ltd Purchased a Machine for $100