When the carrying amount of an asset exceeds the tax base, there will be a deferred...
Homework Answers
The answer is the last option i.e liability; deferred to future periods.
Thus the answer is:
When the carrying amount of an asset exceeds the tax base, there will be a deferred tax liability, because the taxation payments have effectively been deferred to future periods.
Explanation:
The taxable temporary difference results in the payment of taxes when the carrying amount of a liability is settled or the carrying amount of an asset is recovered. Taxable temporary differences give rise to deferred tax liabilities. A deferred tax liability arises:
- If the carrying value of an asset is greater than its tax base OR
- If the carrying value of a liability is less than its tax base.
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When the carrying amount of an asset exceeds the tax base,
there will be a deferred...
Annual Ltd has an asset with a carrying amount of $50,000. The tax base of this...
Annual Ltd has an asset with a carrying amount of $50,000. The tax base of this asset is $75,000. The company tax rate is 30%. The deferred tax item to be recognised by Annual Ltd is: Select one: O a. Deferred tax liability of $7,500 O b. Deferred tax liability of $25,000 O c. Deferred tax asset of $7,500 O d. Deferred tax asset of $25,000
At 30 June 2016, Grace Ltd had the following deferred tax balances: Deferred tax liability Deferred...
At 30 June 2016, Grace Ltd had the following deferred tax balances: Deferred tax liability Deferred tax asset $18 000 15 000 Grace Ltd recorded a profit before tax of $80 000 for the year to 30 June 2017, which included the following items: Depreciation expense – plant Doubtful debts expense Long-service leave expense $7 000 3 000 4 000 For taxation purposes the following amounts are allowable deductions for the year to 30 June 2017: Tax depreciation – plant...
Why is this called deferred tax liability instead of deferred tax asset? Alvis Corporation reports pretax...
Why is this called deferred tax liability instead of
deferred tax asset?
Alvis Corporation reports pretax accounting income of $400,000, but due to a single temporary difference, taxable income is only $250.000. At the beginning of the year, no temporary differences existed Required: 1. Assuming a tax rate of 35%, what will be Alvis's net income? 2. What will Alvis report in the balance sheet pertaining to income taxes? Step-by-step solution Step 1 of 2 A Requirement 1 Since taxable...
At December 31, 2019. Acme Inc. had the following deferred tax balances: Deferred tax liability Deferred...
At December 31, 2019. Acme Inc. had the following deferred tax balances: Deferred tax liability Deferred tax asset Valuation allowance $ 52.500 84,000 21.000 These deferred tax balances relate to two items. First, Acme has recorded excess tax deductions related to its plant assets. At December 31, 2019 plant assets had a book value of $1,000,000 and a tax basis of $750,000 Second, Acme had a NOL carryforward in the amount of $400.000 at December 31, 2019. Acme determined the...
At December 31, DePaul Corporation had a $30 million balance in its deferred tax asset account...
At December 31, DePaul Corporation had a $30 million balance in its deferred tax asset account and a $158 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences: 1. Estimated warranty expense, $35 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty). 2. Depreciation expense, $270 million: straight-line in the income statement; MACRS on the tax return. 3. Income from installment sales of properties, $125 million:...
Swiftsure Ltd has carried forward a deferred tax liability of 170000, arising from differences between carrying...
Swiftsure Ltd has carried forward a deferred tax liability of
170000, arising from differences between carrying amount and tax
bases of the company’s assets. On 30 June 2013, the carrying
amounts and tax bases of the company’s assets were as follows:
Assets Tax base A B Carrying amount $142000 $541000 $820000 $86000 $108000 $340000 $610000 $40000 с D The current income tax expense for the year ended 30 June 2013 is $8400000 and tax rate is 30%. Required: (a) Prepare...
Swiftsure Ltd has carried forward a deferred tax liability of 170000, arising from differences between carrying...
Swiftsure Ltd has carried forward a deferred tax liability of 170000, arising from differences between carrying amount and tax bases of the company’s assets. On 30 June 2013, the carrying amounts and tax bases of the company’s assets were as follows: Assets Carrying amount Tax base A $142000 $108000 B $541000 $340000 C $820000 $610000 D $86000 $40000 The current income tax expense for the year ended 30 June 2013 is $8400000 and tax rate is 30%. Required: (a) Prepare...
At December 31, DePaul Corporation had a $26 million balance in its deferred tax asset account...
At December 31, DePaul Corporation had a $26 million balance in its deferred tax asset account and a $102 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences : 1. Estimated warranty expense, $35 million: expense recorded in the year of sale; tax-deductible when paid (one-year warranty) 2. Depreciation expense, $180 million: straight line in the income statement; MACRS on the tax return 3. Income from installment sales of properties, $75...
1. Deferred tax liability, January 1, 2017, $44,400. 2. Deferred tax asset, January 1, 2017, $0....
1. Deferred tax liability, January 1, 2017, $44,400. 2. Deferred tax asset, January 1, 2017, $0. 3. Taxable income for 2017, $105,450. 4. Pretax financial income for 2017, $222,000. 5. Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $266,400. 6. Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $38,850. 7. Tax rate for all years, 40%. 8. The company is expected to operate profitably in the future. (a) Your answer...
(1 point) When does temporary differences occur? (1 point) When does deferred tax liability occur? (1...
(1 point) When does temporary differences occur? (1 point) When does deferred tax liability occur? (1 point) What is carrying amount? (9 points) Net profit before taxation is $21000. The profit and loss account includes as an expense depreciation of plant $3000 (25% of cost of $12000). For taxation purposes depreciation on plant is claimed at 3322% on cost, that is $4000. The income tax rate is 30%. Required: a) Prepare a statement to determine taxable income. b) Calculate the...
Annual Ltd has an asset with a carrying amount of $50,000. The tax base of this asset is $75,000. The company tax rate is 30%. The deferred tax item to be recognised by Annual Ltd is: Select one: O a. Deferred tax liability of $7,500 O b. Deferred tax liability of $25,000 O c. Deferred tax asset of $7,500 O d. Deferred tax asset of $25,000
Why is this called deferred tax liability instead of
deferred tax asset?
Alvis Corporation reports pretax accounting income of $400,000, but due to a single temporary difference, taxable income is only $250.000. At the beginning of the year, no temporary differences existed Required: 1. Assuming a tax rate of 35%, what will be Alvis's net income? 2. What will Alvis report in the balance sheet pertaining to income taxes? Step-by-step solution Step 1 of 2 A Requirement 1 Since taxable...
At December 31, 2019. Acme Inc. had the following deferred tax balances: Deferred tax liability Deferred tax asset Valuation allowance $ 52.500 84,000 21.000 These deferred tax balances relate to two items. First, Acme has recorded excess tax deductions related to its plant assets. At December 31, 2019 plant assets had a book value of $1,000,000 and a tax basis of $750,000 Second, Acme had a NOL carryforward in the amount of $400.000 at December 31, 2019. Acme determined the...
At December 31, DePaul Corporation had a $30 million balance in its deferred tax asset account and a $158 million balance in its deferred tax liability account. The balances were due to the following cumulative temporary differences: 1. Estimated warranty expense, $35 million: expense recorded in the year of the sale; tax-deductible when paid (one-year warranty). 2. Depreciation expense, $270 million: straight-line in the income statement; MACRS on the tax return. 3. Income from installment sales of properties, $125 million:...
Swiftsure Ltd has carried forward a deferred tax liability of
170000, arising from differences between carrying amount and tax
bases of the company’s assets. On 30 June 2013, the carrying
amounts and tax bases of the company’s assets were as follows:
Assets Tax base A B Carrying amount $142000 $541000 $820000 $86000 $108000 $340000 $610000 $40000 с D The current income tax expense for the year ended 30 June 2013 is $8400000 and tax rate is 30%. Required: (a) Prepare...
1. Deferred tax liability, January 1, 2017, $44,400. 2. Deferred tax asset, January 1, 2017, $0. 3. Taxable income for 2017, $105,450. 4. Pretax financial income for 2017, $222,000. 5. Cumulative temporary difference at December 31, 2017, giving rise to future taxable amounts, $266,400. 6. Cumulative temporary difference at December 31, 2017, giving rise to future deductible amounts, $38,850. 7. Tax rate for all years, 40%. 8. The company is expected to operate profitably in the future. (a) Your answer...
(1 point) When does temporary differences occur? (1 point) When does deferred tax liability occur? (1 point) What is carrying amount? (9 points) Net profit before taxation is $21000. The profit and loss account includes as an expense depreciation of plant $3000 (25% of cost of $12000). For taxation purposes depreciation on plant is claimed at 3322% on cost, that is $4000. The income tax rate is 30%. Required: a) Prepare a statement to determine taxable income. b) Calculate the...
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