Net Ltd sold an air conditioner to a customer for $1,200. As per the agreement, Net Ltd has to deliver and install the air conditioner. The company delivered the air conditioner but installation is likely to take another three days. The correct accounting treatment for Net Ltd is;

a.

Recognise $1,200 as revenue

b.

Revenue should be deferred until the installation

c.

Half of the amount can be recognised as delivery is complete

d.

No entries required in the books until the installation

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Question 12

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DSilva Limited has a product warranty liability amounting to $10,000. The product warranty costs are not tax deductible until paid out to customers. The company tax rate is 28%. The company has:

a.

A temporary difference of $10,000.

b.

A deferred tax asset of $10 000.

c.

A deferred tax liability of $10,000.

d.

A tax base of $10 000.

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Question 13

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Current tax consequences of business operations give rise to:

a.

a deferred liability for income tax payable.

b.

a current liability for income tax payable.

c.

a non-current liability for taxes payable.

d.

a contingent liability for taxes payable.

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Question 14

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ABC Limited has an asset with a carrying value of $50 000. The tax base of this asset is $40 000. The tax rate is 28%. As a result, which of the following deferred tax items does ABC Limited have?

a.

A deferred tax liability of $2,800.

b.

A deferred tax liability of $10 000.

c.

A deferred tax asset of $10 000.

d.

A deferred tax asset of $2,800.

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Question 15

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Generally, when considering the differences between the accounting treatment and the income tax treatment of a particular item, the accounting treatment is based on:

a.

Cash flows.

b.

The income tax legislation.

c.

Accrual accounting is subject to the requirements of accounting standards.

d.

Cash flows adjusted for depreciation charges.

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