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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?

Options:

DR Deferred tax liability (SOFP) £36,000

CR Deferred tax liability (SOFP) £36,000

DR Corporation tax (income statement) £36,000

CR Corporation tax (income statement) £36,000

DR Deferred tax liability (SOFP) £144,000

CR Deferred tax liability (SOFP) £144,000

DR Corporation tax (income statement) £144,000

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Question 2

When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profit or loss?

Options:

Finance cost element of the lease payments

Depreciation of the leased asset

Lease payments paid

Lease payments payable

Capital repayment element of the lease payments

Question 3

Which of the following would limit the effectiveness of analysis performed on the operating profit margins of two separate entities with the same total revenue over a12 month period?

Options:

Different accounting estimates in respect of depreciation of property, plant and equipment.

Different approaches to allocating expenses to cost of sales, administration expenses and distribution costs.

Different interest rates on loan finance available to the entities.

Different pattern of monthly revenues caused by seasonality.

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