UNIVERSITY OF NUEVA CACERES

COLLEGE OF BUSINESS AND ACCOUTANCY

Conceptual Framework and Accounting Standards

ACTIVITY JGAMBOA

LIABILITIES

Problem 8
BSAT C. reported net income for the current year 2020 at P10,000,000 before taxes. Included in the
determination of the said net income were:

Permanent differences
Non-deductible expenses 100,000
Non-taxable income 500,000
Temporary differences
Accrued warranty expenses 250,000
Rental payments made in advance 400,000
Advance collections from customers 500,000
Provisions for probable losses 900,000

The income tax rate is 40% and is not expected to change in the future.

Required:
Determine the following:
1. Current tax expense
2. Total tax expense
3. Total deferred tax asset to be presented in the 2020 Statement of Financial Position
4. Total deferred tax liability to be presented in the 2020 Statement of Financial Position

Problem 9
BSFM Co. reported net income for the current year 2020 at P5,000,000 before taxes. Included in the
determination of the said net income were:

Permanent differences
Non-deductible expenses P150,000
Non-taxable income 50,000

Temporary differences at the beginning of the year:

Cumulative temporary difference creating future
deductible amount 1,200,000
Cumulative temporary difference creating future taxable
amount 800,000

Temporary differences at the end of the year:

Cumulative temporary difference creating future
deductible amount 1,600,000
Cumulative temporary difference creating future taxable
amount 500,000

The income tax rate is 40% and is not expected to change in the future.

Required:
Determine the following:
1. Current tax expense
2. Total tax expense
3. Total deferred tax asset to be presented in the 2020 Statement of Financial Position
4. Total deferred tax liability to be presented in the 2020 Statement of Financial Position
 UNIVERSITY OF NUEVA CACERES
COLLEGE OF BUSINESS AND ACCOUTANCY
Conceptual Framework and Accounting Standards

ACTIVITY JGAMBOA

Problem 10
On January 1, 2020, BSN Corp. started leasing a building from BSCE Leasing Co. for a 10 year term. The
lease agreement does not provide for provision for bargain purchase and that the asset shall be reverted
back to BSCE after the lease term. The estimated useful life of the asset is 15 years and its prevailing fair
value on the inception of the lease was at P6.6M.

The lease is payable at the rate of P500,000 every January 1 and July 1 starting in 2020. The implicit
interest rate of lease known to both parties was at 10% while the incremental borrowing rate was at
12%.

BSN accounted for the lease as an operating lease charging rental expense for the semi-annual
payments made.

Required:
1. Effect of any adjustments to be made to the 2020 net income
2. Amount of short term portion of any lease liability as of December 31, 2020
3. Carrying value of the Building as of December 21, 2020