Question 2 (10 marks)

a) A company has a liability for employee benefits (relating to long-service leave) with a carrying value of $500 000, which will be deductible when the amounts are actually paid. The company has also accrued wages with a carrying value of $300 000, which have already been claimed as a deduction for tax purposes.

Required: (i) Assuming that the tax rate is 30 per cent, what is the amount of the temporary difference? (3 marks)

(ii) Does this give rise to a deferred tax asset or a deferred tax liability, and what is the amount of the deferred tax asset/liability? (3 marks)

b) How does a company calculate its current liability, income tax payable? (4 marks)