Question
Information on ABC corp. during the year is shown below: a. Revenues are recognized for financial reporting at point of sale while revenues are taxed
Information on ABC corp. during the year is shown below:
a. Revenues are recognized for financial reporting at point of sale while revenues are taxed on cash basis. Gross profit recognized for financial reporting amounted to P4,000,000 while taxable gross profit is P3,200,000.
b. Retirement benefit costs are deducted for financial reporting as services and rendered by employees but are deductible only when actually paid to retiring employees. Current service cost recognized during the year is P400,000 while benefits paid to retiring employees amounted to P600,000.
c. Research cost amounting to P360,000 are expensed immediately during the year for financial reporting. For taxation purposes, research cost are amortized over a three-year period. Amortization of research cost deducted for taxation purposes is P120,000.
d. Unrealized losses of P40,000 was recognized during the year in profit or loss on an investment held for trading equity securities. No equivalent adjustments was made for taxation purposes. Any gain or loss on actual disposal of such securities is taxable (tax deductible)
e. Payments during the year for fines, surcharges, and penalties arising from violation of law amounted to P160,000(Non-deductible expenses)
f. ABC reported pretax income of P400,000. Income tax rate is 30%
g. Any operating loss can be carried over to the next period. ECO expects to realize the economic benefit of any operating loss carry forward.
Required:
1.Deferred tax liability
2.Deferred tax asset
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