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FA2-08 Income Taxes
FA2-08 Income Taxes
FA2-08 Income Taxes
Total Tax Expense Versus Current Tax Expense Versus Deferred Tax Expense
Numbers 3, 4 and 5
Acierto Company reported net income for the current year 2019 at P10,000,000 before taxes. Included in the
determination of the said net income were:
Permanent differences
Non-deductible expenses P 100,000
Non-taxable income 500,000
Temporary differences
Accrued warranty expenses 250,000
Rental payments made in advance 400,000
Advance collections from customers 500,000
Provision for probable losses 900,000
Income tax rate is 40% and is not expected to change in the future.
What amount should be reported as deferred tax asset or liability on December 31, 2019?
753,750 deferred tax liability
Squeeze Technique
11) Free Willing Co. paid of P5,000,000 for 2020 estimated income taxes. The changes in assets and liabilities are as
follows:
12/31/20 12/31/19
Deferred tax asset P 1,000,000 P 800,000
Deferred tax liability 450,000 600,000
Income tax payable 500,000 200,000
The deferred tax liability was caused by accelerated depreciation and the deferred tax asset is for rentals received
in advance.
What amount of total tax expense should be recognized in 2020?
4,950,000
How much cash was paid for income taxes during the year?
75,000
Tax Base – Asset Arising From Income Reflected On Both Reports & Asset Taxable On A Cash Basis
17) Gem Company has interest receivable which has a carrying amount of P1,000,000 on December 31, 2022. The
related interest revenue will be taxed on a cash basis in 2023.
The entity has trade receivables that have a carrying amount of P5,000,000 on December 31, 2022. The related
revenue has been recognized for tax purposes for the year ended December 31, 2022
What is the total tax base of interest receivable and trade receivable on December 31, 2022?
5,000,000
Offsetting
19) Sosa Company located its business in two jurisdictions, France and Germany. In both countries, Sosa has the legal
right to offset the taxes receivable and payable. The following information related to deferred tax assets and liabilities:
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