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Use The Following Information To Answer Items 1 To 3:: FARQ 218 Page 1 of 3
Use The Following Information To Answer Items 1 To 3:: FARQ 218 Page 1 of 3
During the current year, Wilkins Company reported accounting income P9,000,000 before income tax. The company revealed the following
information for the current year:
2. What is the (1) deferred tax liability and (2) deferred tax asset at year-end?
A. (1) 150,000; (2) 390,000 B. (1) 390,000; (2) 150,000
C. (1) 60,000; (2) 480,000 D. (1) 480,000; (2) 60,000
4. On January 1, 2018, Rat Company reported deferred tax liability of P1,000,000 and a deferred tax asset of P400,000. On
December 31, 2018, the company reported a deferred tax liability of P1,500,000 and a deferred tax asset of zero. What is the
deferred tax expense for 2018?
A. 100,000 B. 400,000 C. 500,000 D. 900,000
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 P250,000 has been raised against accounts receivable for accounting purposes but such debt are
deductible only when written off as uncollectible. The tax rate is 30%.
11. What is the total income tax expense for the first year?
A. 1,200,000 B. 1,245,000 C. 1,290,000 D. 1,335,000
Dowell Company reported the following carrying amount of assets and liabilities at year-end:
Property 10,000,000
Plant and equipment 5,000,000
Inventory 4,000,000
Trade receivables 3,000,000
Trade payables 6,000,000
Cash 2,000,000
The value for tax purposes for property and for plant and equipment was P7,000,000 and P4,000,000, respectively. The entity has made
a provision for inventory obsolescence of P2,000,000 which is not allowable for tax purposes. Further, an impairment loss against trade
receivables of P1,000,000 has been made. This charge will not be allowed in the current year for tax purposes. The tax rate is 30%.
13. What amount should be reported as (1) deferred tax liability and (2) deferred tax asset at year-end?
A. (1) 300,000; (2) 0 B. (1) 2,700,000; (2) 0
C. (1) 1,200,000; (2) 900,000 D. (1) 3,600,000 ; (2) 900,000
15. What is the income tax expense to be reported in the income statement for the year 2018?
A. 3,060,000 B. 3,300,000 C. 3,600,000 D. 3,900,000
Jomari Company reported pre-tax financial income of P400,000 for 2016. In the computation of income taxes, the following data were
gathered:
Twinnie Company began operations on January 1, 2015. For external reporting, the company recognized revenue from all sales under
accrual method. However, in the tax return, the entity reported qualifying sales under the installment method. The gross profit on these
installment sales under each method was:
The income tax rate is 30%. There are no other temporary or permanent differences.
17. What amount should be reported as deferred tax asset or liability on December 31, 2016?
A. 660,000 asset B. 660,000 liability
C. 360,000 asset D. 360,000 liability
18. Breslin Co. had one temporary difference at the end of 2018 that will reverse and cause taxable amounts of P110,000 in 2019,
and P120,000 in 2020 and 2021. The company had also a deductible temporary difference of P150,000. The pre-tax financial
income for 2018 is P600,000 and the tax rate is 30%. There are no deferred taxes at the beginning of 2018. What is the net
deferred tax expense for 2018?
A. 45,000 B. 60,000 C. 105,000 D. 120,000
Cheng Lao Company located business in two jurisdictions, China and Korea. In both countries, the company has the legal right to offset
the taxes receivable and payable. The following information related to deferred tax assets and liabilities:
In January 2018, the company incurred cost of P12,000,000 in relation to the development of a computer software product. The software
cost was appropriately capitalized and amortized over three years for accounting purposes using straight line. However, the total amount
was expensed in 2018 for tax purposes.
The equipment was acquired on January 1, 2018 for P40,000,000. The economic life is four years without residual value. The equipment
is depreciated using the sum of years’ digits method for accounting purposes and straight line for tax purposes.
In January 2018, the company entered into an agreement with the employees to provide health care benefits. The cost of such plan for
2018 was P4,000,000. This amount was accrued as expense in 2018 for accounting purposes. However, health care benefits are
deductible for tax purposes only when actually paid.
The pre-tax accounting income for 2018 is P26,000,000. The tax rate is 30% and there are no deferred taxes on January 1, 2018.