PRACTICING QUESTIONS (INCL SUGGESTED SOLUTIONS)
Advanced Financial Accounting
Income Tax
Lecturer : Prof. Dr. Leo G. van der Tas
A. On 31 December 2017 entity S recognised interest expense of €100,000, the
payment of which will take place in 2018, so it recorded an accrual on the balance
sheet. For tax purposes interest expense is deducted when it is paid. What is (i) the
tax base of this accrual and (ii) the temporary difference?
1 (i) €0; (ii) taxable temporary difference of €100,000
2 (i) €100,000; (ii) no temporary difference
3 (i) €100,000; (ii) taxable temporary difference of €100,000
4 (i) €0; (ii) deductible temporary difference of €100,000
B. Entities are required to provide a reconciliation between the statutory tax rate and
the effective tax. Which of the following items cannot appear in that reconciliation?
1 Non-deductible expenses.
2 Changes in tax rate.
3 Deductible temporary differences.
4 Tax-exempt income.
C. On 31 December 2017 entity S recognised interest income of €500,000, the payment
of which will take place in 2018, so it recorded an accrual on the balance sheet. For
tax purposes interest income is taxed when it is received. What is (i) the tax base of
this accrual and (ii) the temporary difference?
1 (i) €0; (ii) taxable temporary difference of €500,000
2 (i) €500,000; (ii) no temporary difference
3 (i) €500,000; (ii) taxable temporary difference of €500,000
4 (i) €0; (ii) deductible temporary difference of €500,000
1
Advanced Financial Accounting
Income Tax
Lecturer : Prof. Dr. Leo G. van der Tas
A. On 31 December 2017 entity S recognised interest expense of €100,000, the
payment of which will take place in 2018, so it recorded an accrual on the balance
sheet. For tax purposes interest expense is deducted when it is paid. What is (i) the
tax base of this accrual and (ii) the temporary difference?
1 (i) €0; (ii) taxable temporary difference of €100,000
2 (i) €100,000; (ii) no temporary difference
3 (i) €100,000; (ii) taxable temporary difference of €100,000
4 (i) €0; (ii) deductible temporary difference of €100,000
B. Entities are required to provide a reconciliation between the statutory tax rate and
the effective tax. Which of the following items cannot appear in that reconciliation?
1 Non-deductible expenses.
2 Changes in tax rate.
3 Deductible temporary differences.
4 Tax-exempt income.
C. On 31 December 2017 entity S recognised interest income of €500,000, the payment
of which will take place in 2018, so it recorded an accrual on the balance sheet. For
tax purposes interest income is taxed when it is received. What is (i) the tax base of
this accrual and (ii) the temporary difference?
1 (i) €0; (ii) taxable temporary difference of €500,000
2 (i) €500,000; (ii) no temporary difference
3 (i) €500,000; (ii) taxable temporary difference of €500,000
4 (i) €0; (ii) deductible temporary difference of €500,000
1
