• Indicate for each of the statements whether it is T or F according to NZ IAS 12.

• If the statement is false, rewrite the statement to make it true. If the statement is true, you do NOT need to explain.

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A company purchased equipment on 1 January 2020 for $500,000. For accounting purposes, the equipment is depreciated over eight years on a straight-line basis with no residual value. For tax purposes, the cost of the equipment is depreciated over six years using the straight-line method. At the end of the financial year 31 December 2021, the equipment was revalued to $750,000. The company intends to sell the equipment very soon. Any capital gain from the sale is NOT subject to taxation. The tax rate is 28%.

Statement: Therefore, at the end of the financial year 2021, the journal entry to recognise deferred tax liability adjustment due to revaluation would be: Dr Asset Revaluation reserve OCI $105,000, Cr Deferred tax liability $105,000.