Question 6.5Tax bases and adjusting entries for deferred tax

Rattlesnakes Ltd is reviewing its deferred tax for the year. In each of the following situations prepare the end-of-period adjustment journal entries to account for income tax on the initial appearance or reversal of any temporary differences. Explain in each case why particular accounts are affected.

5.The company has interest receivable of $10000 at the end of the year. No interest was receivable at the beginning of the year. Interest income is included in taxable profit only when received.

6.The company has revalued land at the end of the year. The land was revalued during the year from its original cost of $90000 to a fair value of $150000.

7.The company revalued plant at the beginning of the year from $400000 to $500000. The plant is being depreciated at the rate of 10% per year for accounting purposes and 5% per year for tax purposes.

8.The company has goodwill of $200000 at the end of the year. The goodwill has a tax base of $Nil.