FR Module 4Part Bexercises

FR Module 4Part BExercises

(Financial Reporting)

NOTE: For all questions, assume the applicable tax rate is 30% unless stated otherwise.

PART B:

Question 1:

Entity C had the following on it Statement of Financial Position as at 31 December 20X1:

Warranty obligation 5,000

NOTES:

The warranty obligation is expected to reverse in full in 20X2. Tax is calculated on a cash basis. At the end of 20X1, management was only able to confirm the probability of earning $2,000 of taxable profit in 20X2.

a. What is the tax base for the warranty obligation?

b. What is the deferred tax relating to the warranty obligation?

c. What is the amount of deferred tax that can be recognised in 20X1?

d. What is the journal entry for the amount calculated in part c?

Question 2:

Entity D had the following on it Statement of Financial Position as at 31 December 20X1:

Trade receivables 12,000

Warranty obligation 5,000

NOTES:

The warranty obligation is expected to reverse in full in 20X2. Tax is calculated on a cash basis.

Management anticipate that the temporary difference relating to trade debtors will reverse as follows:

$3,000 in 20X2

$9,000 in 20X3

Other than the above, there were no other transactions.

a. What is the tax base for the trade debtors?

b. What is the deferred tax relating to the trade debtors?

c. What is the amount of the deferred tax asset that can be recognised in 20X1, if any?

Question 3:

Entity F has a delivery truck was purchased on 1 January 20X1 at a cost of 12,000. It is depreciated over 5 years for accounting purposes but over 4 years for tax purposes.

a. What is the deferred tax balance relating to the truck on 31 December 20X2?

b. What is journal entry for the deferred tax relating to the truck in 20X2?

Question 4:

Entity X purchased a customised computer on 1 January 20X1 for $30,000. For tax purposes, the computer only had a tax cost of $25,000 on initial recognition. The computer is depreciated over 4 years for both accounting and tax purposes.

What is the deferred tax balance at the on 31 December 20X1?

Question 5:

Entity G has the following deferred tax assets that arose in the current year:

Deferred tax asset from deductible temporary differences 400

Deferred tax asset from unrecognised tax losses 350

Assuming that all the applicable recognition criteria has been satisfied,

a. What is the journal entry to recognise the $400?

b. What is the journal entry to recognise the $350?

Question 6:

The following information relating to Entity Z is provided:

NOTES:

At the end of 20X1 and 20X2, it was not probable that there would be any future taxable profits beyond the reversal of taxable temporary differences.

All the taxable temporary differences were expected to reverse within the tax loss carry forward period.

The carry-back of tax losses is not permitted.

a. What is the deferred tax liability in 20X1?

b. What is the journal entry for the deferred tax asset that will be recognised in 20X1?

c. What are the journal entries for the recoupment of tax losses in 20X2?

d. What is the current tax journal entries in 20X2?

Question 7:

Entity A purchased the controlling shares of Entity Z. As a result of the business combination, goodwill of $30,000 was recognised. Goodwill is an asset.

What is the deferred tax that will be recognised in relation to the business combination?

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