CFA Level I · CFA Level I Exam · Analysis of Income Taxes
A company has a receivable with a carrying amount of 90,000 for revenue already recognized. The revenue is taxed only when cash is collected. Assuming a 30% tax rate, the tax base of the receivable and the related deferred tax liability, respectively, are closest to:
The tax base is zero and the deferred tax liability is 27,000. All 90,000 of the receivable will be taxable when collected, so the tax base is 90,000 less 90,000. The 90,000 taxable temporary difference multiplied by the 30% tax rate gives the deferred tax liability.
- A0 and 27,000Correct
- B90,000 and 0
- C0 and 90,000
Explanation
Tax base of an asset = carrying amount less amounts taxable in future. All 90,000 will be taxed on collection, so the tax base is 0. The taxable temporary difference is 90,000, and the deferred tax liability is 90,000 × 30% = 27,000. The third option forgets to apply the tax rate.
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