MCQ for CA Final FR - Chapter 10 Ind AS 12: Income Taxes

Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 1 - Financial Reporting - CHAPTER 10: INDIAN ACCOUNTING STANDARD 12: Income Taxes :  - For Practice relevant for May/Nov 23 Examinations

Q:1 A company had purchased an asset at ₹ 1,00,000. Estimated useful life of the asset is 5 years and depreciation rate is 20% SLM. Depreciation rate for tax purposes is 25% SLM. The operating profit is ₹ 1,00,000 for all the 5 years. Tax rate is 30% for the next 5 years. Calculate the Book Value as per financial and tax purposes and then DTL
Calculate Carrying Amount under Financial Accounting for Year 2

1. 80
2. 60
3. 50
4. 40

Q:2 A Ltd prepares financial statements to 31 March each year. The rate of income tax applicable to A Ltd is 20%. The following information relates to trans actions, assets and liabilities of A Ltd during the year ended 31 March 20X2:
(i) A Ltd has a 40% shareholding in L Ltd. A Ltd purchased this shareholding for ₹ 45 Cr. The shareholding gives A Ltd significant influence over L Ltd but not control and therefore A Ltd accounts for its interest in L Ltd using the equity method. The equity method carrying value of A Ltd's investment in L Ltd was ₹ 70 Cr on 31 March 20X1 and ₹ 75 Cr on 31 March 20X2. In the tax jurisdiction in which A Ltd operates, profits recognised under the equity method are taxed if and when they are distributed as a dividend or the relevant investment is disposed of
(ii) A Ltd. measures its head office building using the revaluation model. The building is revalued every year on 31 March. On 31 March 20X1, carrying value of the building (after revaluation) was ₹ 40 Cr and its tax base was ₹ 22 Cr. During the year ended 31 March 20X2, A Ltd charged depreciation in its statement of profit or loss of F2 Cr and claimed a tax deduction for tax depreciation of ₹ 1.25 Cr. On 31 March 20X2, the building was revalued to ₹ 45 Cr. In the tax Jurisdiction in which A Ltd operates, revaluation of property, plant and equipment does no affect taxable income at the time of revaluation.

Basis the above information, you are required to compute the deferred tax liability of A Ltd at 31 March 20X2

1. 10.5 Cr
2. 10.85 Cr
3. 10.15 Cr
4. 10.55 Cr

Q:3 An entity has a deductible temporary difference of `50,000. It has no taxable temporary differences against which it can be offset. The entity is also not anticipating any future profits. However, it can implement a tax planning strategy which can generate profits up to `60,000.The cost of implementing this tax planning strategy is `12,000. The tax rate is 30%. Compute the deferred tax asset that should be recognised

1. 14,000
2. 11,400
3. 11,300
4. 14,400

Q:4 A Limited recognises interest income in its books on accrual basis. However, for income tax purposes the method is ‘cash basis’. On December 31, 20X1, it has interest receivable of `0,000 and the tax rate was 25%. On 28thFebruary, 20X2, the finance bill is introduced in the legislation that changes the tax rate to 30%. The finance bill is enacted as Act on 21stMay, 20X2.
Discuss the treatment of deferred tax in case the reporting date of A Limited’s financial statement is 31st December, 20X1 and these are approved for issued on 31stMay, 20X2

1. deferred tax liability of `1,500
2. deferred tax liability of `500
3. deferred tax liability of `2,500
4. deferred tax liability of `5,500

Q:5 On 1stApril 20X1, S Ltd. leased a machine over a 5 year period. The present value of lease liability is `120 Cr (discount rate of 8%) and is recognized as lease liability and corresponding Right of Use (RoU) Asset on the same date. The RoU Asset is depreciated under straight line method over the 5 years. The annual lease rentals are `30 Cr payable starting 31stMarch 20X2. The tax law permits tax deduction on the basis of payment of rent.
Assuming tax rate of 30%, you are required to explain the deferred tax consequences for the above transaction for the year ended 31st March 20X2

1. 1.8 Cr
2. 1.08 Cr
3. 1.00 Cr
4. 1.05 Cr