A Company Has a Provision for Long Service Leave of $150

question 7

Multiple Choice

A company has a provision for long service leave of $150 000.This amount was recognised as an expense when the provision was created but is deductible for income tax purposes when the leave is taken.If an employee takes long service leave and is paid an amount of $30 000 (and the company income tax rate is 30%) ,the following entry should be made:

• A)
• \(\begin{array}{llr}
• \text { Dr Income Tax Payable } &\$ 9000\\
• \text { Cr Deferred Tax Liability } & &\$ 9000\\
• \end{array}\)
• B)
• \(\begin{array}{llr}
• \text { Dr Deferred Income Tax Expense } &\$ 9000\\
• \text { Cr Deferred Tax Asset } & &\$ 9000\\
• \end{array}\)
• C)
• \(\begin{array}{llr}
• \text { Dr Deferred Tax Asset } &\$9000\\
• \text { Cr Deferred Income Tax Expense} & &\$9000\\
• \end{array}\)
• D)
• \(\begin{array}{llr}
• \text { Dr Deferred Tax Liability } &\$ 9000\\
• \text { Cr Income Tax Payable } &&\$ 9000\\
• \end{array}\)

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