Question

hi there can someone explain how the solution was derived for these mc questions below

Multiple Choice Questions 1. On January 1, Year 2, GHI Inc. had depreciable assets with a book value of $920,000 and a historical cost of S1,000,000. CCA totalling $100,000 had been taken on these assets. During Year 2, depreciation of $80,000 and CCA of $20,000 had been taken on these assets. For both years, the tax rate in effect is 35 %. What is the beginning balance of defered tax for Year 2? A. a credit balance of $20,000 B. a debit balance of $20,000 Ca credit balance of $7.000. D. a debit balance of $7,000. Tax basis acc basis, temp diff, deferred tax ending, open, adj Year 00,000 920000 (20000) (7000) 0 cr 7000 Year 2 880,000 840000 40000 14,000 (7000) dr21000 2. VB Corporation incurred a taxable loss of $80,000. Bascd on a tax rate of 45% what is the potential tax benefit of the taxable loss? A.S36.000 B. S80,000 C. S0 D. cannot be determined 3. TML Corp.'s 2014 statement of financial position shows an asset account called "deferred income tax asset $30,000", which is the benefit of $75,000 loss cary forward, recorded in 2013. In 2014, TML has a taxable income of S 60,000 and the company does not have any temporary difference. Assuming the tax rate is 40 % in both years., which one of the following is the correct joumal entry to record income tax for the company in 2014? A. Dr. Income tax expense 24.000 Cr. Income tax payable 24.000 Dr.Income tax pavable 24.000 Cr. Deferred tax asset-LCF 24.000 B. Dr. Income Tax payable 24,000 Cr. Income tax expense 24,000 C. Dr. Income tax expense 24,000 Cr. Income tax payable 24,000 Dr. Income tax payable 24,000 Cr. Income tax expense 24,000 D. Dr. Deferred income tax assets-LCF 24,000 Cr. Income tax payable 24,000 Dr. Income tax payable 24,000 Cr. Income tax expense 24,000

Answer 1

1. Book value = $920000

Tax Basis value= $10,00,000- $100000

= $900000

Temporary difference = $20000

Tax rate = 35%

Therefore deferred tax= $20000* 35%

$7000

2. This loss can be setoff against other income, thereby saving tax of 45%