Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The profit before tax, as reported in the income statement of Uwu Corporation for the year ended December 31, 2020, amounted to P1,920,000, including the

The profit before tax, as reported in the income statement of Uwu Corporation for the year ended December 31, 2020, amounted to P1,920,000, including the following revenue and expense items:

  • Rent revenue - P450,000
  • Unrealized gain on financial assets at fair value through profit or loss - P110,000
  • Dividend income - P90,000
  • Provision for doubtful accounts - P29,800
  • Provision for inventory writedown - P39,800
  • Operating expenses - see Items 4 and 5 below
  • Interest expense - P100,000

The statements of financial position of Uwu at December 31, 2020 and 2019 showed the following assets and liabilities:

2020 2019
Assets
Cash and cash equivalents 800,000 510,000
Accounts receivable 1,385,000 1,190,000
Allowance for doubtful accounts (125,000) (95,200)
Financial assets at fair value through profit or loss 800,000 690,000
Inventories 750,000 610,000
Allowance for inventory writedown (82,500) (42,700)
Land 400,000 250,000
Building 1,450,000 1,450,000
Accumulated depreciation - Building (217,500) (145,000)
Machinery and equipment 700,000 480,000
Accumulated depreciation - Machinery and equipment (310,000) (192,000)
Deferred tax asset ? 429,480
Liabilities
Accounts payable 521,575 720,000
Accrued operating expenses 553,000 482,000
Unearned rent 675,000 1,125,000
Income tax payable ? 276,000
Loans payable 1,000,000 1,000,000
Deferred tax liability ? 72,600

Additional information:

  1. Uwu leased a portion of its building as an office space with Eksdi, Inc. on July 1, 2019 under an operating lease arrangement. Eksdi has already prepaid the entire rent for three years amounting to P1,350,000, or P450,000 annually, on July 1, 2019.
  2. Uwu invested in equity instruments that it classified at fair value through profit or loss. The cost of this investment on April 1, 2019 (the date of acquisition) was P500,000. The dividend received is related to this investment.
  3. There were no write-offs nor reversals on the allowances for doubtful accounts and inventory writedown during the 2020.
  4. 20% of the prepaid operating expenses on December 31, 2019 and 2020 results to a temporary difference, which will reverse the following year.
  5. 35% of the accrued operating expenses on December 31, 2019 and 2020 results to a temporary difference, which will reverse the following year.
  6. The depreciation for both building, and machinery and equipment are the same for accounting and taxation purposes.
  7. The loan was drawn on January 1, 2018, with 10% interest payable every December 31.

Based on the information above, answer the following:

  1. What is the balance of income tax payable as of December 31, 2020?
  2. What is the balance of deferred tax asset as of December 31, 2020?
  3. What is the balance of deferred tax liability as of December 31, 2020?
  4. How much is the total provision for (benefit from) income tax for the year ended December 31, 2020?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Mastering Attribution In Finance

Authors: Andrew Colin

1st Edition

1292114029, 978-1292114026

More Books

Students also viewed these Finance questions

Question

a. How does this change affect the demand for money? LOP8

Answered: 1 week ago