Apple Ltd purchased a depreciable asset for $360,000 on 1 July 2004. For account

Question

Apple Ltd purchased a depreciable asset for $360,000 on 1 July 2004. For accounting purposes, it is estimated to have a useful life of 12 years with no residual value. For taxation purposes, the useful life is 10 years with no residual value. The asset is depreciated on the straight-line basis for both accounting and tax purposes. The tax rate is 30%.

What is the adjustment required in the deferred tax liability account for the year ended 30 June 2014 and 30 June 2015 respectively?

a) $6,000; ($30,000)
b) $1,800; ($9,000)
c) $1,800; $9,000
d) $60,000; $30,000
e) $18,000; $9,000

and why?

Explanation / Answer

As per As per Timing Books Tax Difference (DTL) ($) ($) ($) 01/07/2004 Original cost 360000 360000 Life 12 10 Depreciation 30000 36000 6000 Tax @ 30% 9000 10800 1800 End of life of asset 30/06/2016 30/06/2014 WDV on 30-6-2014 60000 NIL WDV on 30-6-2015 30000 N/A ($) The DTL balance on 30th June 2014 will be : 18000 (1800 for 10 years) The DTL balance on 30th June 2015 will be : 9000 (the balance of $18,000 will be adjusted towards the tax of 2015 , i.e., 9,000) (18000-9000) Hence, select the answe (e) : $18,000; $9,000

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