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CPA REVIEW SCHOOL OF THE PHILIPPINES Manila PRACTICAL ACCOUNTING PROBLEMS I SUGGESTED SOLUTIONS 5740 DEFERRED INCOME TAX 1. Current tax expense (6,500,000 x 30%) Deferred tax liability (1,000,000 x 30%) Total tax expense (7,500,000 x 30%) Current tax expense (7,000,000 x 30%) Deferred tax liability (1,000,000 x 30%) Total tax expense (6,000,000 x 30%) Pretax accounting income Taxable temporary differences Deductible temporary difference Taxable income Tax rate Current tax expense or income tax payable Current tax expense (7M x 30%) Less: Income tax benefit (2M x 23%) Total tax expense Increase in deferred tax liability (900,000 600,000) Decrease in deferred tax asset Deferred tax expense Taxable temporary difference (2M 1.2M) Pretax financial income Non-taxable interest received (permanent difference) Financial income subject to tax Long term loss accrual in excess of deductible amount Tax depreciation in excess of financial depreciation Taxable income Current tax expense (7M x30%) Deferred tax asset (500,000 x 30%) Deferred tax liability (1,250,000 x 30%) Total tax expense 1,950,000 300,000 2,250,000 2,100,000 ( 300,000) 1,800,000 20,000,000 ( 3,000,000) 1,100,000 18,000,000 30% 5,400,000 2,100,000 500,000 1,600,000 300,000 150,000 450,000 800,000 8,000,000 ( 250,000) 7,750,000 500,000 (1,250,000) 7,000,000 2,100,000 ( 150,000) 375,000 2,325,000 B A B B B Prac. 1 Handouts

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5740