1. The following information was extracted from the records of Rampage Company as of December 31, 2021:

Carrying amount

Other receivables (NRV)

150,000

Prepaid rent

30,000

Motor vehicles

165,000

Accumulated depreciation

61,875

Provisions for warranty

12,000

Deposits received in advance

15,000

The depreciation rates for accounting and taxation are 15% and 20% respectively. Deposits are taxable when received while rentals and warranty costs are deductible when paid. An allowance for doubtful debts of P25,000 has been raised against other receivables for accounting purposes, but such debts are deductible only when written off as uncollectible. The rate applicable was 30%.Round off answers into whole number

a) What is the Deferred Tax Asset of Rampage Company as of December 31, 2021?

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b) What is the Deferred Tax Liability of Rampage Company as of December 31, 2021?

Answer:fill in the blank 2

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2. AA Company began operations on January 1, 2021 and reported a pretax financial income of P3,400,000 as of year ending December 31, 2021. This amount includes:

• Interest on government bonds of P250,000.
• Penalties and fines of P170,000.
• Depreciation expense on its machines of P225,000.
• Rental income of P170,000.

The depreciation expense and rental income included in the 2021 tax return were higher by P90,000 and P45,000 respectively. The enacted tax rate in 2021 and future years is 30%.

a) What is the current tax expense of AA Company?

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b) What is the net deferred tax expense of AA Company?

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c) What is the Deferred tax liability that AA should report in 2021 financial position?

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d) What is the Deferred tax asset that AA should report in 2021 financial position?

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3. At the beginning of 2022, Shellshock Company purchased an asset for P600,000 with an estimated useful life of 5 years and an estimated salvage value of P50,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Shellshock Company's tax rate is 40% for 2022 and all future years. At the end of 2022, what amount of deferred tax asset(liability) is reported on Shellshock's balance sheet?[use negative sign(-) for liability]

Answer:

4. AA Company started operations on January 1, 2021. At the end of the first year of operations, AA reported pre-tax income of P2,800,000. An analysis of the components included in this computation was a P300,000 non-taxable revenue and installment sales of P800,000 of which P350,000 remained uncollected (due March 15, 2023). For tax purposes, income from installment sales is taxable only when cash is collected. The enacted tax rates for 2021 and future years is 30%.

a) What is the current tax expense of AA Company?

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b) What is the deferred tax expense (benefit) of AA Company?[use negative sign(-) for benefit]

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5. The following facts relate to Rally Company:

• Deferred tax liability, January 1 2021; 360,000.
• Deferred tax asset, January 1, 2021; 105,000.
• Pretax financial income for 2021; P2,000,000.
• Non-taxable revenues, P340,000; non-deductible expenses, P210,000.
• Cumulative difference at December 31, 2021, giving rise to future taxable amounts, P970,000.
• Cumulative difference at December 31, 2021, giving rise to future deductible amounts P220,000.
• Tax rate for current and future years 30%.

a) What is Rally Company's current tax expense for the year?

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b) What is Rally Company's net deferred tax expense (benefit) for the year?[use negative sign(-) for benefit]

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6. AA Company provided the following information on December 31, 2023?

Carrying amount = CA

Tax Base = TB

Accounts receivable

CA 3,000,000

TB 3,500,000

Property, plant and equipment

CA 6,500,000

TB 5,000,000

Estimated warranty liability

CA 1,600,000

TB 0

Deposits received in advance

CA 1,400,000

TB 0

The depreciation rates for accounting and taxation are 15% and 25% respectively. The deposits are taxable when received and warranty costs are deductible when paid. An allowance for doubtful debts of P500,000 has been raised against accounts receivable for accounting purposes but such debts are deductible only when written off as uncollectible. The tax rate is 30%. What amount should be reported asdeferred tax asseton December 31, 2023?

Answer:

7. At the end of 2021, AA Company's first year of operations. AA Company reported pretax financial income of P4,900,000. Included under expenses was a P300,000 non-deductible expense. Furthermore, AA Company includes a two-year warranty on its machinery sales. An analysis of the warranty records reveals that it has recorded and accrued warranty provisions of P750,000. Cost and expenses under this classification, however, are deductible only for tax purposes when paid. The enacted tax rates for 2021 and future year is 30%.

a) What is the current tax expense of AA for 2021?

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b) What is the deferred tax expense (benefit) of AA for 2021?[use negative sign(-) for benefit]

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