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CIMAPRA19-F02-1 Exam - Topic 5 Question 94 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam
Question #: 94
Topic #: 5
[All CIMAPRA19-F02-1 Questions]

The tax benefit on a company's asset is 180,000 and the useful life on that asset is five years. The company creates a deferred tax provision to spread this benefit over the asset's useful life.

What entry is needed to reduce this deferred tax provision in the company's year two accounts?

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Suggested Answer: B

by Lizbeth at Aug 02, 2024, 01:45 AM

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Paris
4 months ago
So, we just reduce the liability each year? Interesting!
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Krissy
5 months ago
Definitely not option E, that's way too high!
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Eleni
5 months ago
Wait, is it really that straightforward?
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Quiana
5 months ago
I think it's option A! Sounds right to me.
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Hayley
5 months ago
The deferred tax benefit is 36,000 per year.
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Theodora
6 months ago
I believe we should be debiting the deferred tax liability since we're reducing it, but I can't recall if it's 36,000 or 144,000.
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Brittney
6 months ago
I’m a bit confused about whether we should be looking at the income statement or the statement of financial position for this entry.
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Karrie
6 months ago
I remember practicing a similar question where we had to adjust deferred tax provisions. I think the correct entry is to credit the deferred tax liability.
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Luisa
6 months ago
I think we need to reduce the deferred tax liability by the annual amount, which would be 36,000 for year two, but I'm not sure if it's a debit or credit.
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Laine
6 months ago
I think the key here is to remember that the deferred tax provision is being spread over the asset's useful life, which is 5 years. So in year two, we need to reduce the deferred tax liability by one-fifth of the total, which is 36,000. Option B looks like the right answer to me.
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Hobert
6 months ago
Wait, I'm confused. If the tax benefit is 180,000 over 5 years, shouldn't we be reducing the deferred tax liability by 144,000 in year two (180,000 - 36,000)? I'm not sure about this one.
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Earlean
6 months ago
Okay, I've got this. The tax benefit is 180,000 over 5 years, so in year two we need to reduce the deferred tax liability by 36,000 (180,000 / 5). The entry would be a credit to the deferred tax liability account.
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Jamal
6 months ago
Hmm, I'm a bit unsure about this one. I know we need to reduce the deferred tax provision, but I'm not sure if we debit or credit the deferred tax liability account. I'll have to think this through carefully.
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Harrison
6 months ago
This looks like a straightforward deferred tax question. I think the key is to remember that the deferred tax provision is spread over the asset's useful life, so in year two we need to reduce the provision by one-fifth of the total.
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Malissa
6 months ago
Ah, I think I've got it. The underlined text is correct - the user should go to office.com to access OneDrive for Business directly, rather than trying to sign in through the main Office 365 URL. I'll select "No change is needed".
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Lorriane
11 months ago
Hmm, I'm leaning towards F. Reducing the deferred tax liability by the full 144,000 seems like the logical choice here.
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Juliann
9 months ago
User3: Yeah, F is the right answer. It's important to adjust the deferred tax provision accordingly.
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Lilli
9 months ago
User2: I agree, reducing it by 144,000 seems like the logical choice.
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Ty
10 months ago
User1: I think F is the correct option. It makes sense to reduce the deferred tax liability by the full amount.
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Ahmed
11 months ago
Haha, this is a tricky one! I bet the answer is something like 'All of the above, plus a dance routine and a plate of nachos.'
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Delisa
10 months ago
C) DR Corporation tax (income statement) 36,000
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Yoko
10 months ago
B) CR Deferred tax liability (SOFP) 36,000
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Royce
11 months ago
A) DR Deferred tax liability (SOFP) 36,000
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Judy
12 months ago
I'm not sure, but I think it makes sense to credit the deferred tax liability to reduce it in the year two accounts.
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Phung
12 months ago
I'm going with C. We're reducing the corporation tax expense in the income statement, not the deferred tax liability.
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Dorsey
11 months ago
User 2: No, I believe it should be B) CR Deferred tax liability (SOFP) 36,000
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Dominga
11 months ago
User 1: I think the correct answer is C) DR Corporation tax (income statement) 36,000
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Alease
12 months ago
I agree with Beatriz, because the company needs to reduce the deferred tax provision by recognizing the tax liability on the balance sheet.
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Hana
1 year ago
Option B looks right to me. We need to reduce the deferred tax liability account, so a credit entry is needed.
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Domitila
11 months ago
The entry will help accurately reflect the tax benefit over the useful life of the asset.
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Arlene
11 months ago
Reducing the deferred tax provision will have an impact on the company's financial statements.
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Candida
11 months ago
It makes sense to credit the deferred tax liability account in this situation.
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Lorriane
12 months ago
I agree, option B is the correct entry to reduce the deferred tax provision.
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Beatriz
1 year ago
I think the answer is A) DR Deferred tax liability (SOFP) 36,000.
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