20. Gentleman Ltd revealed the following balances for the year ended 30 June 2019. Account receivable balance was $200,000 net of allowance for doubtful debts. During the year ended 30 June 2019, Gentleman Ltd has created an allowance for bad debts account and provided bad debts expenses of $25,000 for the year ended 30 June 2019. Which one of the following is correct? Select one: Tax base of Account receivable is $175,000 and the business must account for deferred tax asset of $7,500 related to this item. None of these Tax base of Account receivable is $225,000 and the business must account for deferred tax liability of $7,500 related to this item. Tax base of Account receivable is $225,000 and the business must account for deferred tax asset of $7,500 related to this item. Tax base of Account receivable is $200,000 and the business must account for deferred tax asset of $7,500 related to this item.

18

On 1 July 2020, Denham Business Consulting Ltd receives an upfront management service fee of $2,400 from Enfield Ltd. Under the agreement, Denham Business Consulting Ltd will provide ongoing management services until 30 June 2021 on a Straight line monthly basis.

How should Denham Business Consulting Ltd recognise the revenue for their management services provided to Enfield Ltd?

Select one:

None of these

$200 per month for 12 months between 1 July 2020 and 30 June 2021

$150 per month for 12 months between 1 July 2020 and 30 June 2021

$200 on 1 July 2020, then $200 per month for 12 months between 1 July 2020 and 30 June 2021

$1,200 on 1 July 2020, then $100 per month for 12 months between 1 July 2020 and 30 June 2021

17

The following information relates to Johnson Ltd for the year ended 30 June 2019.

Accounting profit before income tax	$200 000
Entertainment expenses (not tax deductible)	10 000
Depreciation of machinery (accounting)	20 000
Depreciation of machinery (tax)	50 000
Annual leave expense (not a tax deduction until the leave is paid)	4 000
Income tax rate	30%

Assuming no leave has been paid to employees during the year, what would be the current tax liability?

Select one:

$64,800

$51,000

$55,200

None of these

$45,000

16.

Limbo. Limited had a profit after tax of $100 000 for the financial year. Included in this profit was:

Depreciation expense of $24 000

Gain on sale of investments of $12 000

Also, accounts receivable increased by $13 000 and inventories decreased by $4 000. The cash flow from operating activities during the year was:

Select one:

$100 000

$96 000

None of these

$103 000

$99 000

15

The following information was extracted from the financial records of Apple Limited: Equipment purchased on 1 July 2020 for $200 000 (accounting depreciation 10% straight line; tax depreciation 15% straight line). If the company tax rate is 30%, the deferred tax item that will be recorded by Apple Limited at 30 June 2021 is:

Select one:

DR Deferred tax liability $3000

None of these

CR Deferred tax liability $3000

CR Deferred tax asset $3000

DR Deferred tax asset $3000

14

Contingent liabilities are:

Select one:

not recognised in the notes to the financial statements because the possibility of an outflow in settlement is remote.

recognised in the notes to the financial statements because the possibility of an outflow in settlement is remote.

recognised in the financial statements unless the possibility of an outflow in settlement is remote.

recognised in the notes to the financial statements unless the possibility of an outflow in settlement is remote.

13

Kristen Limited and Bell Limited enter into a finance lease agreement with the following terms:

lease term is 8 years

estimated economic life of the leased asset is 10 years

4 annual rental payments of $30 000 each payable in advance

residual value at the end of the lease term is not guaranteed by the lessee

interest rate implicit in the lease is 8%.

On inception date, the present value of the minimum lease payments is:

Select one:

$99 364

$107 312

None of these

$120 000

$111 767

Clear my choice

12

he following relates to Enfield Ltds carrying amounts and tax base as at 30 June 2020. Assume a Tax rate of 30%.

Accounts	Carrying amount	Tax base
Assets
Trade receivables (net)	51,000	53,000
PPE (net)	100,000	65,000
Goodwill	20,000	20,000

How much is deferred tax assets and deferred tax liabilities as at 30 June 2020?

Select one:

DTA $600; DTL $10,500

None of these

DTA $2,000; DTL $35,000

DTA $35,000; DTL 2,000

DTA $10,500; DTL $600

11

Which of the following items must be separately disclosed in the statement of cash flows?

Interest paid

Dividends paid

Interest received

Dividends received

Auditors remuneration paid

Select one:

I, II, III and IV only

II, III, IV and V only

II, III and IV only

None of these

I, II and V only