aw zo-1 Tax base 08LEM ne cost P130,000. For tax purposes, depreciation of P50,000 has 5 ady been deducted in the current and prior periods and the remaining ateady ye deductible in future periods, ether as depreciation or through @ coraction ‘on disposal. Revenue generated by using the machine is taxable, deduct tn disposal of the machine will be taxable and any loss on disposal any 6 jeductible for tax purposes. Trade receivables have a carrying amount of P135,000. The related revenue 2 aay been included in taxable profi (tax loss). has at receivable has a carrying amount of P124,000, The related interest , revenue will be taxed on a cash basis. revsjends receivable from a subsidiary have a carrying amount of P12,000. 4 Pimgividends are not taxable. isan receivable has a carrying amount of P200,000, The repayment ofthe Am ail have no tax consequences. 4 knvasset which cost 150,000 has a carrying amount of 100,000. Cumulative depreciation for tax purposes is P90,000 and the tax rate is 30%. . Gument liabilities include accrued expenses with a carrying amount of £30,000. The related expense will be deducted for tax purposes on a cash basis. lan entity recognizes a liability of P150,000 for accrued product warranty ants For tax purposes, the product warranty costs will not be deductible tntil the entity pays claims. The tax rate is 30%. | Current liabilities include accrued expenses with a carrying amount of 160,000, The related expense has already been deducted for tax purposes. i. Current liabilities include accrued fines and penalties with a carrying amount of P180,000. Fines and penalties are not deductible for tax purposes. . A loan payable has a carrying amount of 300,000. The repayment of the Joan will have no tax consequences. . Current liabilities include interest revenue received in advance, with a carrying amount of P90,000. The related interest revenue was taxed on a cash basis. juired: Determine the tax base of the above items. ‘Accounting Tax return |__record 150,000 50,000 200,000 220,000 1280\ccounting for Income Tax Tae 100,000 income on installment sales 200,000 Pro yubtful accounts Annual leave expense 400,000 Rentrevenue ~ 110,000 ome is 6,000,000 The pretax financial inc Required: Compute for the following: 1, Taxable income Current tax expense or payable 2. 3. Deferred tax liability 4, Deferred tax asset 5. Net income 1e Statement Liability Method erations during the current year fo} differences on December 31, 20% » PROBLEM 29-3 Incom Data gathered from Marcos Co's o Deductible temporary 2,000,000. Pretax income in 2021 is 3,000,000. Additional information: Y Income tax rate is 30%. Y There are no temporary differences as of the beginning of the year, 7) Marcos’ assesses that it is no longer probable that sufficient taxable pug iar be available to allow the benefit of part or all of that deferred tars vials utilized. Marcos then reassessed its deferred tax asset and cons that it is more likely than not that only half of the deferred tax asset vil realized in the future. : Required: Answer the following: 1. How much is the adjusted deferred tax asset? 2. How much s the adjusted income tax expense? 3. How much s the adjusted deferred tax expense (benefit)? 4. How muchis the adjusted current tax expense? PROBLEM 29-4 Fortthe year ended December 31, 2021, REO Company reported pretax fat Income of #5000000. The taxable income was P4,800,000, The aifere’8 rates 30% and income received by the entity during the period. The income and REO made estimated tax payment during 2021 of ®5000™ Questions: Basedon the above data, answer the following: uch should REO report as current tax expense for 2021? a. 1,500,000 PL b. 1,440,000 ft peaneo) 1281ag ~ Accounting for Income Tax et AO Tener — aPiejach shout REO report as income tax expense for 20217 Host 1,500,000 ©. P1,000,000 1,440,000 d. P940,000 nich should REO report as income tax payable for 20217 9,000 . 1,000,000 a prato000 4, P940,000 b pM 29-5 . 8 ‘ear ended December 31, 2021, Kings Gambit Company reported pretax J income of P6,000,000. The taxable income was P7,000,000. The i an ce js due to rental received in advance, Rental income is taxable when ed ‘The income tax rate is 30% and Kings Gambit made no estimated tax ferment in 2021. ns: een the above data, answer the following: B\yhat amount should Kings Gambit report as current income tax expense for 2021? a. 2,100,000 . P1,100,000 b. 1,800,000 a. P300,000 2, What amount should Kings Gambit report as total income tax expense for 20217 a. 2,100,000 c. P1,100,000 b. 1,800,000 d. P300,000 3, What amount should Kings Gambit report as total income tax payable for 2021? a, 2,100,000 c. P1,600,000 b. 1,800,000 d. P1,300,000 PROBLEM 29-6 for the year ended December 31, 2021, CPAR Company reported pretax financial income of 2,500,000. The taxable income was 2,400,000. The difference is due to accrued interest income. The income tax rate is 30% and CPAR made estimated tax payment during 2021 of P250,000. Questions: Sased on the above data, answer the following: How much should CPAR report as current tax expense for 2021? @ 750,000 c. P500,000 5. 720,000 d. P470,000 2. How much should CPAR report as income tax expense for 2021? + 750,000 c, P500,000 . P720,000 d. P470,000 pee Much should CPAR report as income tax payable for 2021? 750,000 c. P500,000 * 720,000 d, P470,000 1282Taxis) The following information is related to Succeed and Hagulo Compan, rst of operations, Succeed ¢ © Asof December 31, 2021, its first f 68 Ch oe ny ferences totaling P3,000,000, OF this tora, Py, | ct PL, relates to current items, Succe also had deductible temporary NN sto a diffe, | totaling P1,500,000, P250,000 of which relates to current jtgq"*tyg! financial income for the y was P20,000,000. Income tax rate j “og | 2020, Baguio Company reported a deferred tay © OnDecember 31, 2020, Bag D e ia P700.000 and a deferred tax asset of P200,000. At the endl of 2994 tiny | Company reported a deferred t H, asset of zero. ‘Chapter 29 ~ Account PROBLEM 29-7 x liability of P875,000, and a Aefergps ty Questions: a Based on the above data, answer the following: 1. Succeed Company should report income tax payable on Pecember 31,59 at a. 6,450,000 c. P5,775,000 | b. P6,000,000 d. P5,550,000 2. The deferred tax expense to be reported by Baguio Company for 2021 2 P175,000 c. P375,000 b. 200,000 d. P875,000 PROBLEM 29-8 For the year ended December 31, 2021, NETARC Company reported tok income of P9,000,000 before income tax. Selected information for 2021 iss follows: Interest income on government bonds P 1500000 Depreciation per tax return in excess of per book 500,000 Warranty expense on the accrual basis 100000 Actual warranty expenditures 300d Income tax payments 500000 The income tax rate is 30%. Questions; Based on the above data, answer the following: 1, The current liability for 2021 income tax. should be a. 2,400,000 ¢, P2,250,000 b. 2,310,000 d. P2,110,000 2, The income tax expense for 2021 a. 2,400,000 b. P2,310,000 fein 7 110, The income tax payable for 20 a. P2,400,000 a: P181 b. 2,310,000 a. P1750,000 1283_ accounting for Income Tax ter ater 99-9 Timing differences onEM Mit Comporation has a prestay income of 200,000. The following ef Han was gathered nati” iecharges and penalties during the period r 70,000 Fines a etile premium on if insurance of key employees 47,000 om det come received on government securities Inter ject to final tax 10,000 equ ataccelerated depreciation used in taxation over Paces ght-line depreciation used in financial reporting 20,000 warranty expense accrued for financial reporting purposes Tat ie tax deductible only when actually paid 30,000 gent received in advance 16,000 fen Me tax payments made inthe frst three quarters 40,000 yaxrate 30% Feninning balance of taxable temporary differences 24,000 pee mning balance of deductible temporary differences 18,000 yestions: sean the above data, answer the following: “The amount of income tax expense is 2, P89,400 c. P81,600 b, P86,100 d, P81,510 ‘The amount of current income tax expense a. 89,400 c. P81,600 b. 786,100 d. P81,510 The amount of current income tax payable a. P89,400 c. P49,400 b. ?81,600 d. 41,600 Deferred tax expense (asset) for the period was a. P11,100 c. P7,800 b. (P11,100) d. (P7,800) Deferred tax asset at the end of the period is at a 19,200 c. P17,400 b. 18,200 d, P17,200 Deferred tax liability at the end of the period is at a £14,200 c. P12,400 b. 13,200 d, P12,300 BLEM 29-11 Revaluation January 1, 2018, Easy Company acquired an equipment for P6,000,000. The semsg is depreciated using straight-line method based on a useful life of 10 with no residual value. pruary 1,2021, after 3 years, the equipment was revalued at a replacement 8,000,000 with no change in the useful life. 1284ecounting for Income Tax Chapter 29 before depreciation for 2021 is pz al income here are no other temporary dig The pretax financl ly 4 and t income tax rate is 30' beginning of the year: Questions: 7 Questiomne above data, answer the following! Base on ish revaluation surplus On JaMUany 20217 a. 1,400,000 c, 2,000,000 b, 980,000 d. P1,320,000 a what isthe deferred tax Hilly on January 2, 202% areing revaluation? 8 a. 1,400,000 , 420,000 b, 980,000 d. 600,000 3, Whatis the current tax expense for 2021? a. 1,020,000 ¢. P960,000 a. P1,080,000 b. P1,380,000 4. What is the deferred tax liabi revaluation? a. P360,000 c. P1,080,000 b. 1,440,000 d. P1,020,000 jlity on December 31, 2021 arising fa, ttement shall report total income tax expense at The 2021 income stat a. 1,020,000 c. P960,000 b. P1,380,000 d. P1,080,000 PROBLEM 29-12 Comprehensive The accounting profit before tax for the year ended December 31, 202 fr Doremi Corporation amounted to 175,900 and included the following: Interest income P 11,000 Long-service leave expense 7,000 Doubtful debts expense 4,200 Depreciation-plant (15% pa) 33,000 Rent expense 22,800 3,900 Entertainment expense (non-deductible) The draft statement of financial position on December 31, 2021 contained following assets and liabilities: 0 on 2021 202 00 Accounts receivable en via Allowance for doubtul debts (000) G29 ry 7 00 Interest receivable moo Prepaid rent 2008 2.400 Plant 2,800. 9000 220,000 22 1285 |rs | gter 29 - Accounting for Income Tay na d ‘pulated depreciation-plant nce” d tax asset (99.000) (66,000 rr 5000) pefers payable 5000) Aceon on for long-service leave rao 3360 prosred tax liability 64 00g Taeo0 e ? mio information: ? 729 A tax depreciation rate for plant ire Theta rate is 30%, 510% pa, straight line, ‘the company has P15,000 in tax losses carried forward from previ Previous year. questions: on the above and the result of your aco the year ended December 31, zo compute for the following as of and rent tax liability 1. a P51,120 ©. P52,590 b, P58,260 . P53,760 2, Deferred tax liability a P1140 ©. P20,340 b. P19,200 4. P11,040 3, Deferred tax asset a. ?24,000 © 712,540 b. 30,600 4. P11,400 4, Deferred tax expense a P180 ©. P6,780 b. P36,300 d. P38,580 5, Total income tax expense a. P53,940 ©. P53,580 b. P50,940 4. P51,300 PROBLEM 29-13 Comprehensive Haba Co. is a manufacturing company who wishes to calculate its taxable profit or bss for the year ended 31 December 2021. There are the statement of profit orloss and other comprehensive income, the statement of financial position and the notes below, Tax rate for 2021 is 30%, but the new tax rate of 32% for the year 2022 and beyond has already been enacted before the year end. Following are the financial statements for the period ended 31 December 2021. Statement of Financial Position as of 31 December 2021 Current Assets; Cash and cash e P 135,000 quivalents . Tide receivables 469,500 riding investments 156,000 Ventories 228,000. P 988,500 1286Chapt "29 ~ Accounting for Income Tax __________ Noncurrent Ass Property, plant and equipment Product development costs Investment in subsidiary Iksi 2 TOTAL ASSETS 900,000 45,000 30,000 Current Liabilities: Trade payables Health care benefits for employees P 573,000 52,500_ P 625,559 Noncurrent Liabilities: Deferred income - government grants 30,000 Liability for product warranty costs 12,000 Deferred tax liability (from 2020) , 58,624 Equity: Share capital 900,000 ‘Accumulated profits 613,379 Revaluation surplus 66,000 sistaan LITIES 2.2 TOTAL EQUITY & LIABI —PL263500 Statement of Comprehensive Income for the year ended 31 December 2021 (incomplete) Revenue 3,603,000 Less: Cost of sales __2,880,000_ Gross profit 723,000 Less: Operating costs 576,000 Profit from operations 147,000 Less: Finance costs 19,500 Profit before taxation P_127,500 Additional information: 1) Depreciation expense for the year 2021 allowable in line with ta legislation is 154,500. Accounting depreciation included in operating xs is P127,500. Cost of PPE is P1,200,000 and Haba deducted expenses a 312,000 in its tax returns prior the year 2021. Moreover, as of 31 December 2021, Haba for the first time revalued its property, plant a! equipment to market value of P900,000 (revaluation surplus = P66,000)- In 2018, Haba incurred product development costs of ®75,000. These costs were recognized as an asset and amortized over period of 10 years. For purposes, Haba deducted full product development costs in 2018. 3) Trading investments were acquired in 2020 with cost of 172,500. Las investments are classified as at FVTPL and thus recognized in tht ® value. Fair value adjustments are not allowable by the tax authorities, ©) Bad debt provision amounts to P97,500 and relates to 2 debtors: deb iaea 20) ea ae originates in 2019 and 100% provision was bar os ‘ lebtor B - P37,500 (receivable originates in 2020 2M 04, o Provision was recognized in 2021). Tax law allows deduction & ” 2) 1287 _—— |‘accounting for Income Tax eon for debtors overdue for me provision erduc for more than 2 ye acbtee for more than 3 years oreret counts for inventory obsolese yaa aes 28,100 (total provision: PA i 20 yas iis vera provision je rants are not taxable, Full g ment ran ull government g ore nthe statement of nancial postion ont grant recelved in 2021 is increased a liability for i 21, Haba i yy for product warrant 4) WHEY warranty costs are not tax deductible until the con Piet ue ms paid in 2021 amounted to PA,650 company pays : Haba introduced health care b | Ming the Yea" care benefits for 5 burng the 2 Hlowable for tax purposes only when Banani oe Hae in ", another 30% for z fo nf, 50% for dehtors ethan 1 ye nd remaini n created not tax expenses 9, recognized i esreyth PAS 19, Tecognized In profit or loss when employees provide service: ion and ' | ies. or representation and promotion included in operati 9 epunt (0 1,350. These are not deductible for tax ae ing expenses | to deduct expenses for fuel onl 7 - | taxlaw allows 7 i ly up to P3,000 per vehicle 10) yea. Haba had 4 tehicles in 2021 and its total fuel expenses amounted to | 715,450. jons: e above, answer the following: the taxable income for 2021? c. P264,750 | pased on th | What is | 7 4 pi9,250 |g P258,150 d. None of the choices 2. Whatis the current income tax expense for 2021? | 7 a P79,425 c. P57,375 | oa, 877445 d. None of the choices | 4, The excess tax depreciation will result in 2. Decrease in DTI. b. Increase in DTL Increase in DTA 4. Decrease in DTA | 4, The tax base of the ‘Trading investments’ is | 4% 172,500 c. P156,000 | 5. 16,500 d. Nil ‘ or base of the ‘Liability for product warranty costs’ is 98,750 c. P4,650 * *12,000 a. Nil 1288 SSS