Question
On December 31, 2X19, Choco Company prepared a reconciliation of the company's financial income and taxable income, as follows: Pretax financial income P200,000 Estimated litigation
On December 31, 2X19, Choco Company prepared a reconciliation of the company's financial income and taxable income, as follows:
Pretax financial income P200,000
Estimated litigation expense 500,000
Installment sales (400,000)
Taxable income P300,000
The estimated litigation expense of P500,000 will be deductible in 2X20 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of P200,000 in each of the next two (2) years. The estimated liability for litigation is classified as non-current, and installment accounts receivable are classified as P200,000 current and P200,000 non-current. The income tax rate is 32%.
Required:
- How much shall be the income tax expense?
- How much shall be recognized as deferred tax asset?
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