Raging Dragons Ltd Has a Depreciable Asset That Is Estimated

question 51

Multiple Choice

Raging Dragons Ltd has a depreciable asset that is estimated for accounting purposes to have a useful life of 15 years.For taxation purposes the useful life is 10 years.The asset was purchased at the beginning of year 1,there is no residual value,and the straight-line method of depreciation is used for both tax and accounting purposes.The tax rate is 30 per cent and the cost of the asset is $150,000.What adjustment will be required to the deferred tax liability account in years 10 and 11?

• A) End of year 10: $1,500; Year 11: $1,500
• B) End of year 10: $5,000; Year 11: $(10,000)
• C) End of year 10: $1,500; Year 11: $(3,000)
• D) End of year 10: $15,000; Year 11: $(3,000)
• E) None of the given answers.

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Definitions:

Planning

The process of creating and maintaining a plan, which involves setting objectives, determining strategies to achieve those objectives, and organizing resources.

Controlling

In management, refers to the process of monitoring performance, comparing it with goals, and taking corrective action as needed.