Q u e s t oi o n 4

On 30 June 2022, an extract of the statement of financial position prepared for internal purposes, but excluding the effect of income tax, disclosed the following:

Assets

Cash

Equipment

Accumulated depreciation

Liabilities

Provision for Warranties

Additional information:

$80,000

700,000 (105,000)

15,000

1. The following balances existed at 1 July 2021:

Deferred tax asset $ 3,000

Deferred tax liability 22,000

There have been no recorded changes to these balances since 1 July 2021.

2. The equipment was acquired on 1 July 2021. Depreciation for accounting purposes was 15% per annum (straight-line method), while 25% per annum (straight-line method) was used for tax purposes.

3. The tax rate is 30%.

The adjustments to deferred tax asset and deferred tax liability at 30 June 2022 are:

Deferred tax asset

A Increase $1,000

B Decrease $1,500

C Decrease $1,500

D Increase $1,500

Question 5

Deferred tax liability

Increase $1,500 Decrease $1,000 Increase $1,000 Decrease $1,000