Prepare answers to each of the following questions. Assume a tax rate of 30%.
(i) Harry Ltd has a balance of prepaid rent in the balance sheet amounting to $100 000 as at 30 June 2012.
(a) Using the appropriate formula, calculate the tax base of the prepaid rent.
(b) Prepare the journal entry (if required) to account for the future tax consequences.
(c) Assuming a temporary difference exists, explain the rationale for recording either a deferred tax asset or deferred tax liability as at 30 June 2012.
(ii) Thomas Ltd has a balance of interest received in advance amounting to $15 000 in the balance sheet as at 30 June 2012. Interest received is taxed on the cash basis.
(a) Using the appropriate formula, calculate the tax base of the interest received in advance.
(b) Prepare the journal entry (if required) to account for the future tax consequences.
(c) Assuming a temporary difference exists, explain the rationale for recording either a deferred tax asset or deferred tax liability as at 30 June 2012.
(iii) Can 'deferred tax assets' be offset against 'deferred tax liabilities'? Explain making reference to the appropriate accounting standard.