BUS 504 EXAM CH6-ACCOUNTING FOR COMPANY INOME
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
1. The recognition of provides more complete or relevant information for economic decision
making than .
a. current tax and deferred tax; deferred tax alone
*b. current tax and deferred tax; current tax alone
c. deferred tax alone; current tax and deferred tax combined
d. current tax alone; current tax and deferred tax combined
2. The tax expense related to profit or loss of the period is required to be presented:
a. on the face of the statement of financial position.
*b. on the face of the statement of profit or loss and other comprehensive income.
c. in the statement of cash flows.
d. in the statement of changes in equity.
3. The entries for income tax for the period are comprised of three components. Which of the following is
NOT included in the components?
a. Recognition of the current tax liability.
b. Recognition of the movement in deferred tax liability included in the profit or loss for the period.
*c. Recognition of the temporary difference on the purchase of goodwill.
d. Recognition of the movement in deferred tax asset included in the profit or loss for the period.
4. Generally, when considering the differences between the accounting treatment and the income tax
treatment of a particular item the accounting treatment is based on:
a. cash flows.
b. the income tax legislation.
c. cash flows adjusted for depreciation charges.
*d. accrual accounting and is subject to the requirements of accounting standards.
5. During the year ended 30 June 2015 Harry Ltd, pays quarterly PAYG tax instalments as follows:
$6000 on 28 July 2014
$2000 on 28 October 2014
$8000 on 28 February 2015
$10 000 on 28 April 2015.
On 30 June 2015, Harry Ltd determines its total current tax liability for the year to be $28 000.
The final tax instalment for the year will be a:
a. refund of $2000.
b. payment of $2000.
*c. payment of $8000.
d. payment of $28 000.
6. The following information relates to Hoover Limited for the year ended 30 June 2015.
Accounting profit before income tax (after all expenses have been included) $280 000
Fines and penalties (not tax deductible) 22 000
Depreciation of plant (accounting) 50 000
Depreciation of plant (tax) 110 000
Long-service leave expense (not a tax deduction until the leave is paid) 10 000
, BUS 504 EXAM CH6-ACCOUNTING FOR COMPANY INOME
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
Income tax rate 30%
No employee has been paid long-service leave in the current year. On the basis of this information the
current tax liability is:
a. $69 000.
*b. $75 600.
c. $72 600.
d. $92 400.
7. Differences between the carrying amounts of an entity’s net assets determined under accounting
standards and accrual accounting, and the tax bases of those net assets determined under the Income Tax
Assessment Act, are described as:
a. tax losses.
*b. temporary differences.
c. permanent differences.
d. the current income tax liability.
8. A taxable temporary difference is expected to lead to the payment of:
a. less tax in the future and gives rise to a deferred tax asset.
b. more tax in the future and gives rise to a deferred tax asset.
c. less tax in the future and gives rise to a deferred tax liability.
*d. more tax in the future and gives rise to a deferred tax liability.
9. A deductible temporary difference is expected to lead to the payment of:
*a. less tax in the future and gives rise to a deferred tax asset.
b. more tax in the future and gives rise to a deferred tax asset.
c. less tax in the future and gives rise to a deferred tax liability.
d. more tax in the future and gives rise to a deferred tax liability.
10. CTV Limited has an asset which cost $400 and against which depreciation of $200 has accumulated.
The accumulated depreciation for tax purposes is $280 and the company tax rate is 30%. The tax base of this
asset is:
a. $36.
b. $320.
*c. $120.
d. $80.
11. Deferred tax accounting adjustments are recorded at what point in time?
a. As each transaction arises or is incurred
b. As the cash flows from each transaction occur
c. At the end of each month
*d. At balance date
12. Silver Bullet Limited has a product warranty liability amounting to $12 000. The product warranty
costs are not tax deductible until paid out to customers. The company tax rate is 30%. The company has a:
a. tax base of $12 000.
b. future deductible amount of $0.
c. taxable temporary difference of $12 000.
*d. deductible temporary difference of $12 000.
, BUS 504 EXAM CH6-ACCOUNTING FOR COMPANY INOME
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
13. The following information was extracted from the financial records of Panda Limited: equipment
purchased on 1 July 2014 for $140 000 (accounting depreciation 10% straight line; tax depreciation 20%
straight line). If the company tax rate is 30%, the deferred tax item that will be recorded by Panda Limited at
30 June 2015 is which of the following?
a. Dr Deferred tax asset $14 000
b. Cr Deferred tax asset $4200
c. Dr Deferred tax liability $14 000
*d. Cr Deferred tax liability $4200
.
14. Sydney Limited accrued $20 000 for employees’ long service leave in the year ended 30 June 2015.
This item will not be tax deductible until it is paid in approximately 10 years’ time. If the company tax rate
is 30%, Sydney Limited must record which of the following tax effects as a balance date adjustment?
*a. Dr Deferred tax asset $6000
b. Cr Deferred tax asset $6000
c. Dr Deferred tax liability $6000
d. Cr Deferred tax liability $6000
15. In jurisdictions where the impairment of goodwill is not tax deductible, AASB 112 Income Taxes:
a. requires that any deferred tax items for goodwill be capitalised in the carrying amount of
goodwill.
b. requires that any deferred tax items in relation to goodwill be recognised directly in equity.
*c. does not permit the application of deferred tax accounting to goodwill.
d. allows the recognition of a deferred tax item in relation to goodwill.
16. Unless a company has a legal right of set-off, AASB 112 Income Taxes, requires disclosure of which
of the following information for deferred tax statement of financial position items?
I. The amount of deferred tax assets recognised.
II. The amount of the deferred tax liabilities recognised.
III. The net amount of the deferred tax assets and liabilities recognised.
IV. The amount of the deferred tax asset relating to tax losses.
*a. I, II and IV only
b. I, II and III only
c. III and IV only
d. IV only
17. Under AASB 112 Incomes Taxes, deferred tax assets and liabilities are measured at the tax rates that:
*a. are expected to apply when the asset is realised or the liability is settled.
b. applied at the beginning of the reporting period.
c. applied at the end of the reporting period.
d. prevail at the reporting date..
18. On 1 April 2015, the company rate of income tax changed from 35% to 30%. At the previous
reporting date (30 June 2014) Monty Limited had the following tax balances:
➢ deferred tax assets $20 250
➢ deferred tax liabilities $15 000.
What is the impact of the tax rate change on income tax expense?
*a. Increase $750
, BUS 504 EXAM CH6-ACCOUNTING FOR COMPANY INOME
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
b. Decrease $750
c. Increase $875
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
1. The recognition of provides more complete or relevant information for economic decision
making than .
a. current tax and deferred tax; deferred tax alone
*b. current tax and deferred tax; current tax alone
c. deferred tax alone; current tax and deferred tax combined
d. current tax alone; current tax and deferred tax combined
2. The tax expense related to profit or loss of the period is required to be presented:
a. on the face of the statement of financial position.
*b. on the face of the statement of profit or loss and other comprehensive income.
c. in the statement of cash flows.
d. in the statement of changes in equity.
3. The entries for income tax for the period are comprised of three components. Which of the following is
NOT included in the components?
a. Recognition of the current tax liability.
b. Recognition of the movement in deferred tax liability included in the profit or loss for the period.
*c. Recognition of the temporary difference on the purchase of goodwill.
d. Recognition of the movement in deferred tax asset included in the profit or loss for the period.
4. Generally, when considering the differences between the accounting treatment and the income tax
treatment of a particular item the accounting treatment is based on:
a. cash flows.
b. the income tax legislation.
c. cash flows adjusted for depreciation charges.
*d. accrual accounting and is subject to the requirements of accounting standards.
5. During the year ended 30 June 2015 Harry Ltd, pays quarterly PAYG tax instalments as follows:
$6000 on 28 July 2014
$2000 on 28 October 2014
$8000 on 28 February 2015
$10 000 on 28 April 2015.
On 30 June 2015, Harry Ltd determines its total current tax liability for the year to be $28 000.
The final tax instalment for the year will be a:
a. refund of $2000.
b. payment of $2000.
*c. payment of $8000.
d. payment of $28 000.
6. The following information relates to Hoover Limited for the year ended 30 June 2015.
Accounting profit before income tax (after all expenses have been included) $280 000
Fines and penalties (not tax deductible) 22 000
Depreciation of plant (accounting) 50 000
Depreciation of plant (tax) 110 000
Long-service leave expense (not a tax deduction until the leave is paid) 10 000
, BUS 504 EXAM CH6-ACCOUNTING FOR COMPANY INOME
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
Income tax rate 30%
No employee has been paid long-service leave in the current year. On the basis of this information the
current tax liability is:
a. $69 000.
*b. $75 600.
c. $72 600.
d. $92 400.
7. Differences between the carrying amounts of an entity’s net assets determined under accounting
standards and accrual accounting, and the tax bases of those net assets determined under the Income Tax
Assessment Act, are described as:
a. tax losses.
*b. temporary differences.
c. permanent differences.
d. the current income tax liability.
8. A taxable temporary difference is expected to lead to the payment of:
a. less tax in the future and gives rise to a deferred tax asset.
b. more tax in the future and gives rise to a deferred tax asset.
c. less tax in the future and gives rise to a deferred tax liability.
*d. more tax in the future and gives rise to a deferred tax liability.
9. A deductible temporary difference is expected to lead to the payment of:
*a. less tax in the future and gives rise to a deferred tax asset.
b. more tax in the future and gives rise to a deferred tax asset.
c. less tax in the future and gives rise to a deferred tax liability.
d. more tax in the future and gives rise to a deferred tax liability.
10. CTV Limited has an asset which cost $400 and against which depreciation of $200 has accumulated.
The accumulated depreciation for tax purposes is $280 and the company tax rate is 30%. The tax base of this
asset is:
a. $36.
b. $320.
*c. $120.
d. $80.
11. Deferred tax accounting adjustments are recorded at what point in time?
a. As each transaction arises or is incurred
b. As the cash flows from each transaction occur
c. At the end of each month
*d. At balance date
12. Silver Bullet Limited has a product warranty liability amounting to $12 000. The product warranty
costs are not tax deductible until paid out to customers. The company tax rate is 30%. The company has a:
a. tax base of $12 000.
b. future deductible amount of $0.
c. taxable temporary difference of $12 000.
*d. deductible temporary difference of $12 000.
, BUS 504 EXAM CH6-ACCOUNTING FOR COMPANY INOME
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
13. The following information was extracted from the financial records of Panda Limited: equipment
purchased on 1 July 2014 for $140 000 (accounting depreciation 10% straight line; tax depreciation 20%
straight line). If the company tax rate is 30%, the deferred tax item that will be recorded by Panda Limited at
30 June 2015 is which of the following?
a. Dr Deferred tax asset $14 000
b. Cr Deferred tax asset $4200
c. Dr Deferred tax liability $14 000
*d. Cr Deferred tax liability $4200
.
14. Sydney Limited accrued $20 000 for employees’ long service leave in the year ended 30 June 2015.
This item will not be tax deductible until it is paid in approximately 10 years’ time. If the company tax rate
is 30%, Sydney Limited must record which of the following tax effects as a balance date adjustment?
*a. Dr Deferred tax asset $6000
b. Cr Deferred tax asset $6000
c. Dr Deferred tax liability $6000
d. Cr Deferred tax liability $6000
15. In jurisdictions where the impairment of goodwill is not tax deductible, AASB 112 Income Taxes:
a. requires that any deferred tax items for goodwill be capitalised in the carrying amount of
goodwill.
b. requires that any deferred tax items in relation to goodwill be recognised directly in equity.
*c. does not permit the application of deferred tax accounting to goodwill.
d. allows the recognition of a deferred tax item in relation to goodwill.
16. Unless a company has a legal right of set-off, AASB 112 Income Taxes, requires disclosure of which
of the following information for deferred tax statement of financial position items?
I. The amount of deferred tax assets recognised.
II. The amount of the deferred tax liabilities recognised.
III. The net amount of the deferred tax assets and liabilities recognised.
IV. The amount of the deferred tax asset relating to tax losses.
*a. I, II and IV only
b. I, II and III only
c. III and IV only
d. IV only
17. Under AASB 112 Incomes Taxes, deferred tax assets and liabilities are measured at the tax rates that:
*a. are expected to apply when the asset is realised or the liability is settled.
b. applied at the beginning of the reporting period.
c. applied at the end of the reporting period.
d. prevail at the reporting date..
18. On 1 April 2015, the company rate of income tax changed from 35% to 30%. At the previous
reporting date (30 June 2014) Monty Limited had the following tax balances:
➢ deferred tax assets $20 250
➢ deferred tax liabilities $15 000.
What is the impact of the tax rate change on income tax expense?
*a. Increase $750
, BUS 504 EXAM CH6-ACCOUNTING FOR COMPANY INOME
TAX QUESTIONS WITH ANSWERS 2023 UPDATE
b. Decrease $750
c. Increase $875
