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Quiz 7

The document provides information about accounting problems involving the calculation of current tax liability, deferred tax liability, deferred tax asset, deferred tax expense and total income tax expense. It includes details of pre-tax income, tax rates, tax deductions, depreciation, tax losses and temporary differences that need to be considered in the calculations.

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26 views

Quiz 7

The document provides information about accounting problems involving the calculation of current tax liability, deferred tax liability, deferred tax asset, deferred tax expense and total income tax expense. It includes details of pre-tax income, tax rates, tax deductions, depreciation, tax losses and temporary differences that need to be considered in the calculations.

Uploaded by

Panda Erar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Accounting 4  Pre-tax income in 2021 is 3,000,000.

Quiz 7 Additional information:


 Income tax rate is 30%.
Problem 1: Q Company has a pre-tax income of 200,000. The  There are no temporary differences as of the beginning
following information was gathered: of the year.
Fines, surcharges and penalties during the period 70,000  M’s assess that it is not longer probable that sufficient
Non-deductible premium on life insurance of key 12,000 taxable profit will be available to allow the benefit of
employees part or all of that deferred tax asset to be utilized. M
Interest income received on government securities 10,000 then reassessed its deferred tax asset and concluded
subject to final tax that it is more likely than not that only half of the
Excess of accelerated depreciation used in taxation 20,000 deferred tax asset will be realized in the future.
over straight-line depreciation used in financial
reporting A. How much is the adjusted deferred tax asset?
Warranty expense accrued for financial reporting 30,000 B. How much is the adjusted income tax expense?
purposes but is tax deductible only when actually C. How much is the adjusted deferred tax expense
paid (benefit)?
Rent received in advance 16,000 D. How much is the adjusted current tax expense?
Income tax payments made in the first three 40,000
quarters
Tax rate 30%
Beginning balance of taxable temporary difference 24,000
Beginning balance of deductible temporary 18,000
difference
a. The amount of income tax expense is?
b. The amount of current income tax expense?
c. The amount of current income tax payable?
d. Deferred tax expenses (asset) for the period?
e. Deferred tax asset at the end of the period is at?
f. Deferred tax liability at the end of the period is at?

Problem 2: The accounting profit before tax for the year ended
December 31, 2021, for D Company amounted to 175,900 and
included the following:
Interest income 11,000
Long-service leave expense 7,000
Doubtful debts expense 4,200
Depreciation plant (15% p.a) 33,000
Rent expenses 22,800
Entertainment expense (non-deductible) 3,900
The draft of financial position on December 31, 2021 contained
the following assets and liabilities
2021 2020
Cash 9,000 7,500
Accounts receivable 83,000 76,800
Allowance for doubtful debts (5,000) (3,200)
Inventory 67,100 58,300
Interest receivable 1,000 ----
Prepaid rent 2,800 2,400
Plant 220,000 220,000
Accumulated depreciation-plant (99,000) (66,000)
Deferred tax asset ? 30,360
Accounts payable 71,200 73,600
Provision for long-service leave 64,000 61,000
Deferred tax liability ? 720
Additional information:
 The tax depreciation rate for plant is 10% p.a straight
line
 The tax rate is 30%.
 The company has 15,000 in tax losses carried forward
from previous year.
a. Current tax liability
b. Deferred tax liability
c. Deferred tax asset
d. Deferred tax expense
e. Total income tax expense

Problem 3: Data gathered from M operation’s during the current


year follow:
 Deductible temporary differences on December 31,
2021 are 2,000,000

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