Accounting for Income Tax

Problem 1

AA Company applies PAS 12 in accounting for income taxes. At the end of 2019, the tax effects of temporary differences were as follows:

Deferred tax asset (liability)

Related Asset Classification

Accelerated Tax Depreciation

(75000)

Non Current

Additional cost in inventory for tax purposes

25,000

Current

AA Co. Anticiptes that P10,000 of th deferred tax liability will reverse in 2020.5.15

In its December 31, 2019 Statement of Finacial Position, what amount should AA report as noncurrent deferred liability.

A.40,000b. 50,000c. 65,000d. 75,000

Problem 2

BB Inc.'s Income Statement for its first year of operations showed petax income of P6,000,000.

In addition, th following differences existed between the tax return and accounting record:

Tax Return

Accounting Record

Uncollectible Accounts Expense

2,200,000

2,500,000

Depreciation Expense

8,600,000

5,700,000

Tax Exempt Interest Revenue

-

500,000

The current year tax rate is 30% and the enacted rate for future year is 40%.

What amount should be reported as deferred tax expense in the income statement for the year?

A.1,480,000B. 1,240,000C. 1,040,000D. 780,000

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