1 AE211: Intermediate Acctg.

2
Prepared by: Bernadette Adelaida M. Cope

- EXERCISES on ACCOUNTING FOR INCOME TAX -

Problem 1:

JAY Co. reported net income for the current year 2021 at ₱2,395,000 before taxes. Included in the determination
of the said net income were:

Non-deductible expenses ₱ 319,200

Accrued warranty expenses ₱ 54,000
Rental payments made in advance ₱ 210,000
Advance collections from customers ₱ 171,500
Non-taxable income ₱ 125,800
Provision for probable losses ₱ 65,000

The income tax rate is 30% and is not expected to change in the future.

Required:

1. How much is the current tax expense?

2. How much is the total tax expense?
3. What is the total deferred tax asset to be presented in the 2021 Statement of Financial Position?
4. What is the total deferred tax liability to be presented in the 2021 Statement of Financial Position?
5. Assuming that the expected income tax rate for the following year is 32%, what is the total tax
expense?
6. Assuming that the expected income tax rate for the following year is 32%, what is the total deferred
tax liability?

Problem 2:

KAY Co. reported net income for the current year 2021 at ₱4,180,000 before taxes. Included in the determination
of the said net income were:

Current tax rate 30%

Non-deductible expenses ₱ 84,000
Non-taxable income ₱ 205,000
At the beginning of the year:
Cumulative temporary difference creating future deductible amount ₱ 1,110,000
Cumulative temporary difference creating Future taxable amount ₱ 567,000
At the end of the year:
Cumulative temporary difference creating future deductible amount ₱ 720,000
Cumulative temporary difference creating ₱ 632,000

Required:
7. How much is the current tax expense?
8. How much is the total tax expense?
9. What is the total deferred tax asset to be presented in the 2021 Statement of Financial Position?
10. What is the total deferred tax liability to be presented in the 2021 Statement of Financial Position?
2 AE211: Intermediate Acctg.2
Prepared by: Bernadette Adelaida M. Cope

Problem 3:
EL Co. reported net income for the current year 2021 at ₱560,000 before provision of income tax during the
year. To compute the provision for income tax, the following data are provided:

• Tax depreciation in excess of financial statement amount - ₱ 36,500

• Interest income received - ₱ 80,500
• Rent received in advance - ₱ 175,000
• Dividend income - ₱ 91,700
• Estimated tax payment in the current year - ₱ 65,000
• Provision for bad debts not yet recognized for tax purposes on the current year - ₱ 48,300
• Tax penalties due to late filing on tax return - ₱ 20,000
• Corporate tax rate – 30%

Required:
11. How much is the taxable income for the year?
12. How much is the current tax expense for the year?
13. What is the total deferred tax asset to be presented in the 2021 Statement of Financial Position?
14. What is the total income tax expense for the year?
15. What is the net income after tax?