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The following information relates to AA.
Extract of Trial Balance at 31 December 20X4;
Notes
(i) Inventory at 31 December 20X4 was valued at cost at $30.
(ii) The loan which was received on 1 July 20X4 is repayable in 20X9.
(iii) Corporate income tax represents an over-provision of tax for the year ended 31 December 20X3. AA reported a loss for tax purposes for the year ended 31 December 20X4 and a tax refund is expected amounting to $20.
(iv) Cost of sales, administration and distribution costs need to be adjusted for the following:
What figures should be entered on the face of the Statement of profit or Loss for the year ended 31 December 20X4 in relation to Interest and Corporate income tax?
Suggested Answer: A
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38 comments · newest first
LA
Laurena
11 months ago
I’m leaning towards option B, but I see the arguments for A too.
TA
Tashia
11 months ago
I think interest is actually $50, but not sure about the tax.
GI
Gilma
11 months ago
Wait, how can corporate tax be negative? Sounds off.
KE
Kenneth
12 months ago
Totally agree, option A makes the most sense!
EL
Eladia
12 months ago
Interest should be $25, tax refund means $(37).
LO
Loreen
1 year ago
I keep mixing up the signs for the corporate tax. Is it $(3) or $3? I wish I had reviewed that part more.
JE
Jestine
1 year ago
This question feels similar to one we practiced where we had to adjust for tax provisions. I think I might lean towards option A.
FL
Fletcher
1 year ago
I think the corporate income tax should be a refund since they had a loss, but I can't recall if it should be $(37) or $37.
FA
Farrah
1 year ago
I remember we discussed how to handle interest expenses, but I'm not sure if it's $25 or $50 here.
LA
Latrice
1 year ago
Hmm, the interest expense is tricky. I'm not sure if it should be $25 or $50. I'll need to double-check the details on the loan. And the corporate income tax is a bit unclear too. I better take my time and work through this step-by-step.
JA
Jaclyn
1 year ago
I think I've got this. The interest expense should be $25 since the loan is repayable in 20X9. And the corporate income tax should be $(37) since there's an over-provision from the previous year and a tax refund for the current year. I'm feeling pretty confident about this one.
MY
Myong
1 year ago
I'm a bit confused by the corporate income tax part. It says it's an over-provision from the previous year, but then also mentions a tax refund for the current year. I'll need to carefully work through the details to get the right figure.
WA
Walton
1 year ago
Okay, let's see. The key information I need to focus on is the interest expense and corporate income tax. The loan was received on July 1, 20X4, so I'll need to calculate the interest expense for the 6 months. And the corporate income tax is an over-provision from the previous year, plus a tax refund is expected for the current year.
KE
Kendra
1 year ago
Hmm, I'm a little unsure about the data range. Do I need to include the header row or just the enrollment values?
SA
Sabina
1 year ago
I might lean towards option C, but I have a nagging feeling that I overlooked one of the constraints in the problem.
OR
Oretha
1 year ago
I feel pretty confident about this one. I think option D is the best choice, as obtaining assurance from management about unasserted claims is a crucial step in the audit process. The other options are relevant, but D seems to be the most comprehensive approach.
SH
Shoshana
2 years ago
Wait, wait, wait... Did they really expect us to do math on this exam? I thought this was a certification, not a math competition! Anyway, I'm going with D, because it's the only one that makes sense to me.
ZA
Zana
2 years ago
Yeah, D makes sense to me as well. Let's go with that.
MO
Mona
2 years ago
I agree, D seems to be the most reasonable option based on the information provided.
SH
Sherron
2 years ago
I think D is the correct answer too. It seems like the most logical choice.
NU
Nu
2 years ago
Let's go with D then. Hopefully, we got it right.
JE
Jesse
2 years ago
Yeah, I agree. The other options don't really make sense based on the information provided.
LU
Luther
2 years ago
I think D is the correct answer too. It seems to be the most logical choice.
EZ
Ezekiel
2 years ago
I agree with Linette, the correct answer should be A.
LI
Linette
2 years ago
But the notes mention that there is a tax refund expected, so it should be $(37) not $37.
CH
Chu
2 years ago
This question is like a game of 'Find the Mistakes'! Let's see, the interest should be $50 and the corporate income tax should be $(3). I'm going with D, but I still feel like I'm missing something.
MA
Ma
2 years ago
User 2
AR
Arminda
2 years ago
User 1
RO
Rolland
2 years ago
Hmm, I'm a bit confused. Shouldn't the interest be $25 since the loan was received on 1 July 20X4? And the corporate income tax seems to be an over-provision, so shouldn't it be $(37)? I'm going with B.
EL
Eliz
2 years ago
Great, let's go with option B for the figures to be entered on the face of the Statement of Profit or Loss for the year ended 31 December 20X4.
BE
Berry
2 years ago
Definitely, option B seems to be the most accurate choice based on the information provided.
JO
Jolene
2 years ago
Yes, that makes sense. So, we both agree on option B then.
LI
Lisbeth
2 years ago
I think you're right, the interest should be $25 because of the loan received in July. And the corporate income tax should be $(37) due to the over-provision.
MA
Mari
2 years ago
Okay, let's see. The loan is repayable in 20X9, so the interest should be $50. And since there's a tax refund expected, the corporate income tax should be $(3). Looks like D is the correct answer.
TA
Tammi
2 years ago
Yes, D makes sense considering the loan repayment and the expected tax refund.
GE
Geraldo
2 years ago
I agree, D seems to be the correct answer based on the information provided.
CE
Cecilia
2 years ago
I disagree, I believe the correct answer is B.
LI
Linette
2 years ago
I think the answer is A.