Question

3. At December 31, 2017, the following information was provided by the defined benefit pension plan administrator for Leonardo Corp.:

       Fair value of plan assets................................................ $5,000,000

       Defined benefit obligation............................................    6,200,000

The corporation uses IFRS. What is the net defined benefit liability/asset account that should be shown on Leonardo’s December 31, 2017 statement of financial position?

4. Night Owl Inc. reports a taxable and pre-tax accounting loss of $150,000 for 2017. The corporation's taxable and pre-tax accounting income and tax rates for the last two years were:

       2015             $200,000       20%

       2016               200,000       25%

The 2017 tax rate is 30%. If Indiana elects to use the carryback provisions, the amount that should be reported as income tax receivable for 2017 is

Options a.50,000 b.45,000 c. 35,000 d.30,000

5. On January 1, 2017, Lake Corp., a publicly accountable enterprise, purchased 40% of the common shares of Michigan Inc. and accounts for this investment by the equity method. During 2017, Michigan reported earnings of $900,000 and paid dividends of $300,000. Lake assumes that all of Michigan's undistributed earnings will be distributed as dividends in future periods when the enacted tax rate will be 20%. Lake's current income tax rate is 25%. The increase in Lake's deferred tax liability for this temporary difference is

options: 1) $120,000. 2) $100,000. 3) $ 60,000. 4) $ 48,000.

Can I get the answer for 3,4 and 5 please

Answer 1

Question No. (3)

Answer -

Under IFRS:

If Defined benefit obligation < Fair value of plan assets then it is report as a Net Defined Benefit Asset.

If Defined benefit obligation > Fair value of plan assets then it is report as a Net Defined Benefit Liability.

.

Calculation of Net defined benefit liability/asset account that should be shown on Leonardo’s December 31, 2017 statement of financial position -

	Particulars	Calculation	Amount ($)
A.	Fair value of plan assets	Given in question	5000000
B.	Defined benefit obligation	Given in question	6200000
Net Defined Benefit Liability [B-A]		$6200000 - $5000000	1200000

.

Question No. (4)

Answer -

Step - (1) - Information Given -

Night Owl Inc. reports a taxable and pre-tax accounting loss of $150000 for 2017. The corporation's taxable and pre-tax accounting income and tax rates for the last two years were:                      

2015	$200000	20%
2016	$200000	25%

The 2017 tax rate is 30%.

.

Step - (2) - Calculation of amount that should be reported as Income Tax Receivable for 2017 -

= $150000 * 20%

= $30000.

Therefore, Option (d) is Correct.

.

Question No. (5)

Answer -

Step - (1) - Information Given -

On January 1, 2017, Lake Corp., a publicly accountable enterprise, purchased 40% of the common shares of Michigan Inc. and accounts for this investment by the equity method.

During 2017, Michigan reported earnings of $900000 and paid dividends of $300000.

Lake assumes that all of Michigan's undistributed earnings will be distributed as dividends in future periods when the enacted tax rate will be 20%.

Lake's current income tax rate is 25%.

.

Step - (2) - Calculation of Increase in Lake's Deferred Tax Liability for Temporary Difference -

= ($900000 - $300000) * 40% = $240000 [Earnings from associate, not an income for tax purposes]

= $240000 * 20%

= $48000.

Hence, Option (4) is Correct.