9.
The Philippians Company’s profit before tax for the six Use the following information for the next two questions.
months to 30 September 2019 was P5 million.
However, the business is seasonal and profit before tax
for the six months to 31 March 2020 is almost certain to
be P9 million. Profit before tax equals taxable profit for
this company. Philippians operates in a country where
income tax on companies is at a rate of 30% if annual
profits are below PI 1 million and a rate of 35% where
annual profits exceed P11 million. These tax rates apply
to the entire profit for the year.
Under PAS34 Interim financial reporting, what should be
the income tax expense in Philippians’ interim financial
statements for the half year to 30 September 2019?
a. P1.75 million c. P1.50 million
P2.10 million d. P2.45 million
b.
10. An entity prepares quarterly interim financial reports in
accordance with PAS 34. The entity sells electrical
goods, and normally 5% of customers claim on their
warranty. The provision in the first quarter was
calculated as 5% of sales to date, which was
P2O,0O0,000. However, in the second quarter, a
design fault was found and warranty claims were
expected to be 10% for the whole year. Sales ir: the
second quarter were P30,000,000. What would be the
provision charged in the second quarter’s interim
income statement7
a. P3,OO0,000 c. P2,250,000
b. P4,000,000 d. P5,000,000
f DRILL
1. On June 30, 2019, Sasa Corp. incurred a P200,000 net
loss from disposal of a business segment. Also, on
June 30, 2019, Sasa paid P80,00O for property taxes
assessed for the calendar year 2019. What amount of
the foregoing items should be included in the
determination of Sasa‘s net income or loss for the 6-
month interim period ended 3une 30, 2019?
a. P280,000 c. P180,000
b. P240,000 d. P140,000
2. On March 15, 2019, Anda Co. paid property taxes of
P120,000 on its factory building for calendar year
2019. On April 1, 2019, Anda ‘ made P240,000 in
unanticipated repairs to its plant equipment. The
repairs will benefit operations for the remainder of the
calendar year. What total amount of these expenses
should be included in Anda’s quarterly income
statement for the 3 months ended 3une 30, 2019?
a. P 60,000 c. P150,000
b. P110,000 d. P270,000
3. Aldivinco Corp. experienced a P50,000 decline in value
of its inventory in the first quarter of its fiscal year.
Aldivinco had expected this decline to reverse in the
third quarter, and in fact, the third quarter recovery
exceeded the previous decline by P10,000. Aldivinco‘s
inventory did not experience any other declines in
value during the fiscal year. What amounts of loss or
gain should Aldivinco report in its interim financial
statements for the first and third quarters?
First Ouarter Third Ouarter
a. P0 P0
b. PO P10,000 gain
c. P50,000 loss P50,000 gain
d. P50,000 loss P60,000 gain
On January 1, Lessor Company signed a 1-year rental with
quarterly payments of P10O,00O due at the end of each
quarter. In addition, the lessee must pay contingent rent
of 5% of all sales in excess of P10,000,000. The
contingent rent is paid in one payment on December 31.
The same lessee has used the building for the past 5
years, and in each of those years the lessee reached the
contingent rent threshold of P1O,000,000 in sales. Sales
of the lessee for thd first two quarters are as follows:
Ouarter ended Amount
Narch 31 P3,200,000
3une 30 3,000,000
11. What amount of rent income should be reflected in
Less ‘s quarterly income statement for the three
months ended June 30*
a. P100,000 c. P130,000
b. P125,000 d. P160,000
12. What amount of rent expense should be reflected in
Lessee‘s quarterly income statement for the three
onesended June 3O?
a. P100,000 c. P130,000
b. P125,000 d. P160,0O0
4. During the third quarter of 2019, the accountant at the
Bonifacio Company discovered that a machine
purchased January 2, 2017 for P600,000 had been
erroneously charged against first quarter net income in
2017. The machine should have been depreciated at a
rate of P10,0O0 per month. The correction of this error
should include
a. A charge of P330,O00 to income before taxes of
the third quarter of 2019.
b. An adjustment of P240,000 to the previously
declared income before taxes of the first quarter of
2019.
c. An adjustment of P270,000 to the previously
declared income before taxes of the first quarter of
2019.
d. An adjustment of P30,00O to the previously
declared income before taxes of the first quarter of
2019.
5. Davao Corp. expects to sustain an operating’ loss of
P1,000,000 for the full year ending December 31, its
first year of operations. It operates entirely in one
jurisdiction where the tax rate is 40%. Tax credits for
the year total P100,0O0. No permanent differences
are expected. Realization of the full tax benefit of the
expected operating loss and of the anticipated tax
credits is more likely than not. Thus, Davao expects to
recognize the full tax benefit at year-end as a deferred
tax asset with a valuation allowance of P0. For the
quarter ended March 31, Davao reports an operating
loss of P200,000. How much of a tax benefit should
Davao report for the interim period ended March 31?
a. P 0 c. P100,000
b. P80,000 d. P125,000
SUGGESTED ANSWERS
1. C
2. A
3. A
4. C
5. C
6. B
7. A
8. A
9. A
10. B
11. A
12. B

DRILL
1. B
2. B
3. C
4. D
5. C