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FR Module 4 practice question

 

Financial Reporting Module 4 question

Select the answer you believe is correct then scroll down to see the correct answer and explanation.

1. The junior accountant, tasked with the calculation of deferred tax for the entity, created the following incomplete deferred tax worksheet:

FR M4 question info table

Which account or accounts would give rise to a deferred tax asset?

Accounts receivable only.
Accounts receivable and equipment only.
Equipment and the provision for employee benefits only.
Accounts receivable and the provision for employee benefits only.

 

[SCROLL DOWN TO SEE THE ANSWER]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The correct answer is the fourth option.

Explanation.

Deductible temporary differences gives rise to a deferred tax asset and taxable temporary differences gives rise to a deferred tax liability. Accounts receivable and provision for employee benefits have deductible temporary differences and thus, they give rise to deferred tax assets. Therefore, Option 4 is correct.

September 20, 2015

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