JMJ

Marist Brothers
Notre Dame of Dadiangas University
Accountancy Program

Intermediate Accounting 2 May 14, 2021

Income Tax Ms. DM. Javellana, CPA, MBA

A. The following differences between financial and taxable income were reported by Dider
Corporation for the current year:

a. Excess of tax depreciation over book depreciation 60,000

b. Interest revenue on government bonds 9,000
c. Excess if estimated warranty expense over actual
Expenditures 54,000
d. Unearned rent received 12,000
e. Fines paid 30,000
f. Excess of income reported under percentage-of-completion
accounting for financial reporting over completed
contract accounting used for tax reporting 45,000
g. Interest on indebtedness incurred to purchase tax-exempt
Securities 3,000
h. Unrealized losses on held for trading securities recognized
for financial reporting 18,000

Additional information:
 Dider Corporation had pretax accounting income of P90,000
for the current year, before considering the items listed above.
 Dider Corporation does not have any temporary differences at the
Beginning of the year.
 There were no income tax payments made during the year.
 Income tax rate is 30%.

Requirements: Compute for the following:

a. Income tax expense
b. Current tax expense
c. Deferred tax expense/benefit
d. Current tax payable
e. Deferred tax liability to be presented in the statement of financial position
f. Deferred tax asset to be presented in the statement of financial position
g. Prepare the year-end adjusting entry to record income tax expense and related
accounts

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B. Taken from the records of Totem Revered Symbol Co. as of December 31, 20x1, is the
following information:

Carrying amount Tax Base Difference

Computer software cost 1,000,000 - 1,000,000
Machinery 2,000,000 1,200,000 800,000
Accrued liability-health care 400,000 - 400,000

Additional information:
 Development costs of software after technological feasibility was established were
capitalized for financial reporting. Such costs were recognized as outright deductions
for tax purposes.
 Straight line method is used in depreciating the machinery while sum-of-the-years’
digits method is used for tax purposes.
 Health care benefits are accrued as incurred but are tax deductible only when cash
is actually paid.
 Pre-tax profit for 20x1 is P2,000,000. Income tax rate is 30%.
 There were no temporary differences as of January 1, 20x1.

Requirements: Compute for the following:

a. Deferred tax liability and deferred tax asset for the year.
b. Income tax expense and current tax expense for the year.
c. Deferred tax expense/benefit

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