Questions
Questions

Homework:practice exam 2

Single choice

Part 1Cavan Company prepared the following reconciliation between book income and taxable income for the current year LOADING... ​(Click the icon to view the​ reconciliation.)​Cavan's effective income tax rate for Year 1 is​ 30%. The depreciation difference will reverse equally over the next 3 years at enacted tax rates as​ follows: LOADING... ​(Click the icon to view the enacted tax​ rates.)In​ Cavan's Year 1 Income​ Statement, the deferred portion of its provision for income taxes should​ be: Part 1 A. ​$120,000 B. ​$63,000 C. ​$84,000 D. ​$90,000

Options
A.A. ​ $120,000
B.B. ​ $63,000
C.C. ​ $84,000
D.D. ​ $90,000
View Explanation

View Explanation

Verified Answer
Please login to view
Step-by-Step Analysis
We begin by restating the core scenario: Cavan's Year 1 deferred tax component relates to a depreciation difference that will reverse equally over the next 3 years, and the enacted tax rate available for Year 1 is 30%. The key idea is that the annual reversal of the temporary difference creates a current-year deferred tax amount equal to one-third of the total temporary difference multiplied by the enacted tax rate. Option A: $120,000. If this were the year-1 deferred tax amount, it would imply 1/3 of the total temporary difference times 0.30 equals 120......Login to view full explanation

Log in for full answers

We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!

Similar Questions

Question19 On 1 January 20X5, Aria Ltd acquired 100% shares of Summit Ltd for $110,000. As part of the acquisition, Aria Ltd assessed Summit Ltd’s assets and identified that a parcel of land, previously recorded at a carrying amount of $60,000, had a fair value of $80,000 at the acquisition date. Aria Ltd applies a company tax rate of 30%.Which of the following correctly reflects the required consolidation adjustment to recognise the deferred tax effect of the land revaluation? DR Deferred tax asset $6 000 CR Income Tax Expenses $6 000 CR Deferred tax liability $6 000 DR Deferred tax liability $6 000 CR Deferred tax asset $6 000 ResetMaximum marks: 1 Flag question undefined

Question30 On 30 June 2025, Esther Ltd had an item of plant with an original cost of $100 000 and accumulated depreciation of $40 000. At this date, the fair value of the plant was $75 000 and Esther Ltd revalued the plant to this fair value. The tax rate is 30%.How would the tax effect of the revaluation be recorded in Ester Ltd’s books? [table] Income tax expense — OCI | Dr | 4 500 | Current tax liability | Cr | | 4 500 [/table] [table] Deferred tax asset | Dr | 4 500 | Income tax expense — OCI | Cr | | 4 500 [/table] [table] Deferred tax asset | Dr | 4 500 | Current tax liability | Cr | | 4 500 [/table] [table] Income tax expense — OCI | Dr | 4 500 | Deferred tax liability | Cr | | 4 500 [/table] [table] Income tax expense — P and L | Dr | 4 500 | Deferred tax liability | Cr | | 4 500 [/table] ResetMaximum marks: 1 Flag question undefined

Question34 The following information relates to Zeplin Ltd for the year ended 30 June 2025: [table] Interest payable at 1 July 2024 | 90 000 Interest payable at 30 June 2025 | 130 000 Interest expense | 150 000 [/table] The income tax rate is 30%. The journal entry to record the movement in deferred tax for the above information is: DR Income tax expense $12 000 / CR Deferred tax liability $12 000. DR Deferred tax liability $12 000 / CR Income tax expense $12 000. DR Deferred tax asset $27 000 / CR Income tax expense $27 000. DR Deferred tax asset $12 000 / CR Income tax expense $12 000. DR Income tax expense $12 000 / CR Deferred tax asset $12 000. ResetMaximum marks: 1 Flag question undefined

Question30 Monte Ltd a coffee shop company owns a machine and this machine is depreciated on a straight-line basis with a useful life of 10 years with a zero residual value. The tax depreciation rate is also straight-line and based on 8 years useful life and zero residual value. The tax rate is 30%. The machine has an original cost of $500,000 and an accounting balance of accumulated depreciation of $370,000. Which journal entry would correctly record the deferred tax adjustment for Monte Ltd’s machine? No journal entry required Dr Deferred Tax Asset 18,750 Cr Income Tax Expense 18,750 Dr Income Tax Expense 18,750 Cr Deferred Tax Liability 18,750 Dr Deferred Tax Asset 18,750 Cr Income Tax Expense 18,750 Dr Income Tax Expense 39,000 Cr Deferred Tax Liability 39,000 ResetMaximum marks: 1 Flag question undefined

More Practical Tools for Students Powered by AI Study Helper

Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!