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

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 94
Topic #: 5

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?

ADR Deferred tax liability (SOFP) 36,000

BCR Deferred tax liability (SOFP) 36,000

CDR Corporation tax (income statement) 36,000

DCR Corporation tax (income statement) 36,000

EDR Deferred tax liability (SOFP) 144,000

FCR Deferred tax liability (SOFP) 144,000

GDR Corporation tax (income statement) 144,000

HCR Corporation tax (income statement) 144,000

Show Suggested Answer

Suggested Answer: B

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

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Lorriane

1 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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Ahmed

2 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

6 days ago

C) DR Corporation tax (income statement) 36,000

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Yoko

10 days ago

B) CR Deferred tax liability (SOFP) 36,000

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Royce

1 months ago

A) DR Deferred tax liability (SOFP) 36,000

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Judy

2 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

2 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

1 months ago

User 2: No, I believe it should be B) CR Deferred tax liability (SOFP) 36,000

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Dominga

2 months ago

User 1: I think the correct answer is C) DR Corporation tax (income statement) 36,000

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Alease

2 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

2 months 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

1 months ago

The entry will help accurately reflect the tax benefit over the useful life of the asset.

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Arlene

1 months ago

Reducing the deferred tax provision will have an impact on the company's financial statements.

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Candida

1 months ago

It makes sense to credit the deferred tax liability account in this situation.

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Lorriane

2 months ago

I agree, option B is the correct entry to reduce the deferred tax provision.

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Beatriz

3 months ago

I think the answer is A) DR Deferred tax liability (SOFP) 36,000.

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