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INCOME TAXES
PROBLEMS
5-1. a. Nontaxable
b. Nondeductible
c. Nondeductible
d. Temporary difference – Future taxable amount
e. Temporary difference – Future taxable amount
f. Temporary difference – Future deductible amount
g. Temporary difference – Future deductible amount
5-2.
Pretax financial income P11,000,000
Add Nondeductible expenses (b + c) 400,000 + 40,000 440,000
Less Nontaxable income (a) (2,000,000)
Financial income subject to tax P 9,440,000
Add Future deductible amounts (f + g) 750,000 + 400,000 1,150,000
Less Future taxable amounts (d + e) 1,500,000 + 1,000,000 (2,500,000)
Taxable income P8,090,000
Income tax expense – Current 2,427,000
Income tax payable 2,427,000
30% x 8,090,000
Income tax expense – Deferred 750,000
Deferred tax liability 750,000
30% x 2,500,000
Deferred tax asset 345,000
Income tax expense – Deferred 345,000
30% x 1,150,000
or one compound entry may be made as follows:
Income tax expense – Current 2,427,000
Income tax expense – Deferred 405,000
Deferred tax asset 345,000
Income tax payable 2,427,000
Deferred tax liability 750,000
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Chapter 5 - Income Taxes
2015 2016
Income tax expense-Current 360,000 450,000 Income tax
payable 360,000 450,000
(30% x 1,200,000) (30% x 1,500,000)
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Chapter 5 - Income Taxes
(d)
2013 2014 2015 2016
Income tax expense:
Current P 240,000 P 267,000 P 360,000 P 450,000
Deferred (Benefit) 90,000 30,000 ( 30,000) (90,000)
Total income tax expense
P 330,000 P 297,000 P 330,000 P 360,000
(e)
2013 2014 2015 2016
Income before income tax P1,100,000 P 990,000 P1,100,000 P1,200,000
Less income tax expense
(see above) 330,000 297,000 330,000 360,000
Net income P 770,000 P 693,000 P 770,000 P 840,000
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Chapter 5 - Income Taxes
Problems
MC17 B 1,800,000 x 35% = 630,000
MC18 B Excess of Book Value > Tax Basis of Equipment
MC19 B (2,000,000 x 30%) + (1,000,000 x 35%) = 950,000
MC20 D 10,000,000 x 30% = 3,000,000
MC21 C (8,000,000 – 4,000,000) x 30% = 1,200,000
MC22 B [(700,000 x 30%) + (1,400,000 x 35%)] – [(500,000 x 30%) + (1,000,000 x
35%)] = 700,000 – 500,000 = 200,000 (all non-current)
MC23 C 1,200,000 – 750,000 = 450,000; 450,000 x 35% = 157,500
MC24 B 1,500,000 x 30% = 450,000
MC25 D 6,000,000 x 30% = 1,800,000
MC26 C 9,000,000 x 30% = 2,700,000
MC27 D 42,000 / 30% = 140,000; 600,000 + 140,000 = 740,000
MC28 C 150,000 x 30% = 45,000
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Chapter 5 - Income Taxes
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