ACTIVITY 1.

Zeus Company reported pretax financial income of P3,000,000 for the year ended
December 31,2020. The taxable income was P 4,000,000.

The difference is due to rental received in advance. Rental income is taxable when received.

The income tax rate is 30% and Zeus Company made estimated tax payment of P500,000
during the current year.

Required:

a. What are the journal entries relating to income tax for 2020?

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b. What is the total income tax expense for 2020?
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NOTE:

It is recorded as deferred Tax Asset since Accounting Income (3,000,000) is lower than its
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Taxable income (4,000,000). Hence, Rental received in advance is an example of revenues and
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gains included in taxable income of current period but are included in accounting income of
future periods (Deferred Tax Asset).
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