QUESTION: 69

YZ has $40,000 of plant and machinery which was acquired on 1 June 20X1.Tax depreciation rates on plant and machinery are 25% reducing balance. All plant and machinery was sold for $24,000 on 1 June 20X3.
Calculate the tax balancing allowance or charge on disposal for the year ended 31 May 20X3 and state the effect on the taxable profit.

A balancing allowance of $1,500 increases taxable profit.
A balancing allowance of $1,500 reduces taxable profit.
A balancing charge of $1,500 reduces taxable profit.
A balancing charge of $1,500 increases taxable profit.

Answer(s): D

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QUESTION: 70

The financial statements of JK for the year ended 31 August 20X4 were approved on 10 November 20X4.
Within these financial statements which of the following would have been treated as a non-adjusting event in accordance with IAS 10 Events After the Reporting Period?

Inventory which was originally valued at its cost of $45,000 being sold for $37,000 in September 20X4.
A fire in JK's main warehouse on 3 September 20X4 destroying 60% of the inventory that had been held at the year end.
Notification received on 31 August that one of JK's major customers had gone into liquidation and was unlikely to pay any outstanding invoices.
The completion of a court case on 5 November 20X4 in which JK was ordered to pay damages of $150,000.

Answer(s): B

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QUESTION: 71

Which of the following would be capitalized as an intangible asset in accordance with IAS 38 Intangible Assets?

The cost of market research into a new geographical market.
The cost of assets used in the research and development department.
The cost of testing a new process which will create efficiency savings of 10% once implemented.
The cost of advertising the launch of a new product.

Answer(s): C

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QUESTION: 72

XYZ operates in Country A where tax rules state that entertaining costs and donations to political parties are disallowable for tax purposes.
XYZ calculated both its accounting and taxable profits for the year ended 31 December 20X2 after deducting $10,000 of entertaining costs.
It is considering what impact the ruling that "entertaining costs are disallowable for tax purposes" will have on its two profit figures.
Which of the following correctly states the impact of the ruling on the profits already calculated?

Accounting profit will not be affected but taxable profit will increase by $10,000.
Both accounting and taxable profits will increase by $10,000.
Accounting profit will decrease by $10,000 and taxable profit will increase by $10,000.
Both accounting and taxable profits will decrease by $10,000.

Answer(s): A

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