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dheerajcm123
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36) At 30 June 20X9, the current asset of Oscar Co includes interest receivables of $5000 which
will be taxed when it is received. The current liabilities of Oscar Co include accrued expenses
of $4000, which have already been deducted for tax purposes.
What are the temporary differences in respect of these transactions?
a) Interest receivable $0
Accrued expenses $0
b) Interest receivable $5000
Accrued expenses $0
c) Interest receivable $0
Accrued expenses $4000
d) Interest receivable $5000
Accrued expenses $4000please help me as i am having exams
P2-D2
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Hi,
It is a tricky one but you need to look at the asset and liability individually, comparing each with what would appear on the tax authorities SFP.
For the receivable the SFP balance is $5,000 as that is what we have recorded but nothing would be on the tax authorities SFP as they do not tax it until is is received, hence a tax base of nil.
For the accrued expense the balance is $4,000 on the SFP and as they have already been deduced for tax purposes then the tax authorities are also allowing this accrual as a tax deduction and so they would accrue it in their tax SFP as $4,000.
I think this therefore means that it is answer (b)
Thanks
dheerajcm123
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