Questions
Questions
Single choice

Question42 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] Deferred tax asset | Dr | 4 500 | Income tax expense — OCI | Cr | | 4 500 [/table] [table] Income tax expense — OCI | Dr | 4 500 | Deferred tax liability | 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 | Current 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

Options
A.Deferred tax asset Dr 4 500   Income tax expense — OCI Cr   4 500  
B.Income tax expense — OCI Dr 4 500   Deferred tax liability Cr   4 500  
C.Deferred tax asset Dr 4 500   Current tax liability Cr   4 500  
D.Income tax expense — OCI Dr 4 500   Current tax liability Cr   4 500  
E.Income tax expense — P and L Dr 4 500   Deferred tax liability Cr   4 500  
View Explanation

View Explanation

Verified Answer
Please login to view
Step-by-Step Analysis
First, establish the scenario: an item of plant has a cost of 100,000 and accumulated depreciation of 40,000, so carrying amount is 60,000. Its fair value at 30 June 2025 is 75,000, so the revaluation increases the carrying amount by 15,000 (75,000 − 60,000). The tax rate is 30%, so the temporary difference created by the revaluation is 15,000, and the corresponding deferred tax liability is 30% of 15,000 = 4,500. Option A: Deferred tax asset Dr 4,500; Income tax expense — OCI Cr 4,500. This is incorrect because the effect of a......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

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

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

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!