AKP Ltd Depreciates a Non-Current Asset Using the Straight-Line Method

question 16

Multiple Choice

AKP Ltd depreciates a non-current asset using the straight-line method. Tax law stipulates that the asset should be depreciated using the reducing-balance method at 1.5 times the straight line rate. Under normal circumstances, which of the following statements is correct?

• A) After year 1, the tax base of the asset exceeds the accounting base and will give rise to a deferred tax liability.
• B) After year 1, the tax base of the asset is less than the accounting base and will give rise to a deferred tax liability.
• C) After year 1, the tax base of the asset exceeds the accounting base and will give rise to a deferred tax asset.
• D) After year 1, the tax base of the asset exceeds the accounting base and will give rise to a tax asset.