Why a temporary difference relating to employee benefits

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Assume that for a particular company the only temporary difference for tax-effect accounting purposes relates to the depreciation of a newly acquired machine. The machine is acquired on 1 July 2015 at a cost of $500,000. lts useful life is considered to be ?ve years, after which time it is expected to have no residual value. For tax purposes it can be fully written off over two years. The tax rate is assumed to be 30 per cent.

Required

Problem (a) Determine whether the depreciation of the machine will lead to a deferred tax asset, or a deferred tax liability?

Problem (b) What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2018?

Problem (c) Explain why a temporary difference relating to employee benefits obligations for long-service leave creates a deferred tax asset?

Reference no: EM132919946

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