Sea Otter Ltd Uses the Revaluation Model for All Classes

question 20

Multiple Choice

Sea Otter Ltd uses the revaluation model for all classes of property, plant and equipment. The following information relates to two items of nlant the CRM650 and DRM700

$\begin{array}{llcc} \text { } & \text { CRM650}& \text {DRM700} \\ \text {Cost (acquisition date \( 1 / 1 / 20 \mathrm{X} 1 \) ) } &\$5000000&\$8000000\\ \text { Useful life - taxation } &8\text {years}&8\text {years} \\ \text { Useful life - accounting } &10\text {years}&5\text {years}\\ \text { Fair value \( 36 / 06 / 20 \mathrm{X} 2 \) } &\$5400000&\$7500000\\ \text { } &\\\end{array}$

-For the CRM650, the difference in depreciation for tax and accounting purposes for the year ending 30/06/20X2 results in:

• A)a taxable temporary difference of $600 000
• B)a deductible temporary difference of $600 000
• C)a deferred tax revenue and a deferred tax liability of $37 500
• D)a deferred tax revenue and deferred tax asset of $37 500

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Definitions:

Husband and Wife

Legal or social partners bound by marriage, with specific rights and obligations towards each other as defined by law or custom.

Capacity

An element of a valid contract; the freedom to enter into a contract, which is sometimes limited by law as is the case, for example, with minors, the insane, the intoxicated, aliens, bankrupts, and Indians.

Married Women

Women who are legally wed under the laws or customs recognized by their jurisdiction, affecting various legal rights and obligations.

Bankrupts

Individuals or entities that have been legally declared incapable of paying their debts and have their assets administered for the benefit of their creditors.