Companies
Company Operations
Taxation Theory
Taxation Practical
Surprise Me!
100
A company comes into existence when it is registered with the: A. Attorney-General's Department; B. Australian Securities and Investments Commission; C. Australian Accounting Standards Board; D. Financial Reporting Council.
What is B. Australian Securities and Investments Commission
100
According to the AASB Framework, assets are: A. future obligations; B. benefits to be controlled by the entity as a result of future transactions; C. future benefits controlled by the entity as the result of past events; D. items that depend upon the occurrence of another event before they result in a future benefit.
What is C. future benefits controlled by the entity as the result of past events
100
Income tax payable by a company is based on its: A. taxable income; B. accounting profit; C. total revenue; D. total deductions.
What is A. taxable income
100
ABC Limited adopted tax effect accounting during the current financial period. When estimating the balance date adjustments at the end of the financial period the following information was determined: Current tax liability $10 000; Deferred tax liability $12 000; Deferred tax asset $15 000. The amount that this company will recognise as current Income tax expense is: A. $10 000; B. $22 000; C. $25 000; D. $7 000.
What is D. $7 000
100
Steveo Limited acquired an asset 'Goodwill' for $60 000. At balance date the Goodwill had a carrying value of $20 000. The tax base of this asset is zero. If the tax rate is 30%, what is the amount of the deferred tax item at balance date? A. $0; B. $6 000; C. $12 000; D. $18 000.
What is A. $0
200
A small proprietary company must satisfy at least two of the following tests. It must have gross revenue of less than $10 million and: A. gross assets of less than $10 million; B. gross assets of less than $20 million; C. fewer than 100 employees at the end of the financial year; D. fewer than 50 employees at the end of the financial year.
What is D. fewer than 50 employees at the end of the financial year.
200
Income arises because of changes in: A. equity; B. assets and liabilities; C. expenses; D. contingent items.
What is B. assets and liabilities
200
The tax effect method of accounting for a company's income tax is based on an assumption that: A. income tax expense is equal to income tax payable; B. income tax expense is not equal to current tax liability; C. an accounting balance sheet and a tax balance sheet are the same; D. a tax balance sheet is prepared according to accounting standards.
What is B. income tax expense is not equal to current tax liability (The tax effect method assumes that tax expense is also a function of deferred tax assets and liabilities)
200
arton Limited has an accounting profit before tax of $200 000. All of the following items have been included in the accounting profit: depreciation of equipment $30 000 (tax deductible depreciation is $20 000); entertainment expenses $15 000 (non-deductible for tax purposes); Long service leave expense provided $6 000 (no employee took long service leave during the year). The tax rate is 30%. The amount of current tax liability is: A. $81 300; B. $69 300; C. $50 700; D. $38 700.
What is B. $69 300
200
The tax base for an asset is determined using which of the following formulae? Tax base for an asset = A. Carrying amount – Future taxable amount + Future deductible amount; B. Carrying amount + Future taxable amount – Future deductible amount; C. Carrying amount – Future taxable amount – Future deductible amount; D. Carrying amount + Future taxable amount + Future deductible amount.
What is A. Carrying amount – Future taxable amount + Future deductible amount
300
Which of the following statements is NOT true in relation to public companies: A. A public company is required to have issued share capital B. A public company can have only one member C. A public company is any company that is not a proprietary company D. A public company must appoint a secretary
What is A. A public company is required to have issued share capital
300
A listed company has issued 30 000 shares for $1 each. The shares are currently trading on the Australian Securities Exchange for $3 each. Details from the company's financial statements reveal: Total assets $100 000; Total liabilities $60 000; Retained earnings $5 000. The amount of recorded equity of this company is: A. $90 000; B. $30 000; C. $35 000; D. $40 000.
What is D. $40 000
300
Differences may arise between the accounting treatment of an item and its tax treatment because: A. the tax treatment follows accrual principles and accounting treatment focuses on cash flows; B. accounting treatment follows accounting concepts while the tax treatment is based on GAAP; C. tax treatment follows cash flow principles and the accounting treatment follows accrual principles; D. accountants are not obliged to follow any rules when compiling a company's tax return.
What is C. tax treatment follows cash flow principles and the accounting treatment follows accrual principles
300
Juicy Limited has an accounting profit of $100 000. The following items are included in that profit: depreciation on motor vehicles $8 000; non-tax deductible entertainment expenses $5 000. Depreciation on motor vehicles is double the accounting rate. The tax on company income is 30%. Which of the following is the amount of taxable income for this company? A. $71 000; B. $97 000; C. $103 000; D. $129 000.
What is B. $97 000
300
Reporting entities must prepare and present a set of general purpose financial statements. These include: I a statement of financial position II a trial balance III a statement of comprehensive income IV a statement of changes in equity V a statement of cash flows A. I, II, III and IV only; B. I, III and V only; C. I, III, IV and V only. D. II, IV and V only.
What is C. I, III, IV and V only
400
Replaceable rules deal with: I Member's meetings II Powers and remuneration of directors III Dividend policy IV Inspection of company's books by members V Appointment and termination of auditors A. I, II and IV B. I, II, III and IV C. II, III and V D. I, II, IV and V
What is A. I, II and IV
400
As well as expenses that arise in the ordinary activities of a business the following item is recognised as an expense of a company: A. losses; B. dividends; C. redemption of shares by a company; D. transfers out of retained earnings.
What is A. losses
400
Current and deferred tax assets lead to the recognition of: A. reserves; B. losses; C. expenses; D. income.
What is D. income
400
Roland Limited has a depreciable asset with a carrying value of $50 000. The tax base of this asset is $40 000. The tax rate is 30%. As a result, which of the following future tax items does Roland Limited have? A. A future tax asset of $10 000. B. A future tax liability of $10 000; C. A future tax asset of $3 000; Roland Limited has a depreciable asset with a carrying value of $50 000. The tax base of this asset is $40 000. The tax rate is 30%. As a result, which of the following future tax items does Roland Limited have? A. A future tax asset of $10 000. B. A future tax liability of $10 000; C. A future tax asset of $3 000; D. A future tax liability of $3 000. .
What is D. A future tax liability of $3 000
400
David Limited acquired an asset on 1 July 20X7 for $50 000. Accounting depreciation is charged at the rate of 25% straight line. Tax depreciation is charged at the rate of 50% straight line. The asset has no residual value. At 30 June 20X8 the tax base of the asset is: A. $50 000; B. $37 500; C. $25 000; D. $12 500.
What is C. $25 000
500
The role of the Australian Securities and Investments Commission is to: I Regulate advertising, selling and disclosure of financial services to consumers. II Protect markets and consumers from manipulation and unfair practices. III Act as a corporate watchdog. IV Issue accounting standards. V Enforce compliance with accounting standards. A. I, II, IV and V; B. II, III, IV, V; C. I, II, III, V; D. I, III, IV, V.
What is C. I, II, III, V
500
An appropriate accounting entry to record the declaration of a bonus dividend out of the Asset revaluation reserve account is: A. DR Bonus dividend CR Asset revaluation reserve; B. DR Asset revaluation reserve CR Cash; C. DR Asset revaluation reserve CR Share capital; D. DR Cash CR Share capital
What is C. DR Asset revaluation reserve CR Share capital;
500
A temporary difference between the carrying value of an asset (or liability) and its tax base that results in taxable amounts in future periods when that item is recovered or settled are known as: A. taxable temporary differences; B. deductible temporary differences; C. permanent differences; D. the taxable value of the item
What is A. taxable temporary differences
500
Big Limited has an asset with a carrying value of $30 000 and a tax base of $50 000. The tax rate is 30%. Which of the following will be part of the balance date journal entries made to recognise tax effect accounting for this company? A. CR Deferred tax liability $6 000; B. DR Deferred tax asset $6 000; C. DR Income tax expense $6 000; D. CR Income tax liability $6 000.
What is B. DR Deferred tax asset $6 000
500
The 'value in use' of an asset is determined as the: A. initial historic cost of the asset; B. recoverable amount of the asset; C. depreciated original cost of the asset; D. discounted present value of the future cash flows expected from the asset.
What is D. discounted present value of the future cash flows expected from the asset
M
e
n
u