KER Commenced Operations in 2013

question 93

Multiple Choice

KER commenced operations in 2013.The company has recorded an accrual for warranty in its books during the year ended December 31, 2014 amounting to $100,000.During the year 2014, customers required service from goods sold in 2013 amounting to $60,000.No similar expenditures were made during 2013.KER accrued warranty expenses totalling $100,000 for 2013 and 2014.As a result of the information above, what is the amount of deferred taxes that will appear on the 2014 statement of financial position? Assume a 20% tax rate for both years.

• A)A Deferred tax liability of $8,000
• B)A Deferred tax asset of $40,000
• C)Nil.
• D)A Deferred tax asset of $8,000

---

Definitions:

Reaction Formation

A defense mechanism where an individual unconsciously converts unwanted or dangerous thoughts, feelings, or impulses into their opposites.

Repression

A psychological process where individuals unconsciously block out painful or unwanted memories and desires from their conscious awareness.

Id

A component of Sigmund Freud's psychoanalytic theory, representing the unorganized part of the personality structure that contains basic instinctual drives.

Ego

In psychoanalytic theory, the part of the mind that mediates between the conscious and unconscious and is responsible for reality testing and a sense of personal identity.