Assessment-2

Due Date of Submission – Feb 9, 2022

Submit in Schoology using “shirwin.sandoval@olivarezcollege.edu.ph”

1.

1. Luzon Corporation has one temporary difference at the end of 2022 that will reverse
and cause taxable amounts of P550,000 in 2023, P600,000 in 2024, and P650,000 in
2025. Luzon’s pretax financial income for 2022 is P3,000,000, and the tax rate is 30%
for all years. There are no deferred tax asset and deferred tax liability at the
beginning of 2022.

Required:

(a) Compute the taxable income and income tax expense-current for 2022.

Pretax financial income P3,000,000

Future taxable amount (1,800,000)
Taxable income P1,200,000
Income tax payable: 30% x 1,200,000 P360,000

(b) Compute the deferred tax liability at Dec 31, 2022

(c) Prepare journal entries to record income tax expense for 2022

Income Tax Expense – Current 360,000

Income Tax Expense – Deferred 540,000
Income Tax Payable 360,000
Deferred Tax Liability 540,000
30% x 1,200,000 = 360,000
30% x 1,800,000 = 540,000

2. Mindanao Corporation, in its first year of operations, has the following differences
between the book basis and tax basis of its assets and liabilities at the end of 2022.

It is estimated that the warranty liability will be settled in 2023. The difference in equipment
(net) will result in taxable amounts of P200,000 in 2023, P300,000 in 2024, and P100,000 in 2025.
The company has taxable income of P5,200,000 in 2022. As of the beginning of 2022, its enacted
tax rate is 30% for 2022-2024 and 35% for 2025. Mindanao expects to report taxable income
through 2025.
Required: Journal entries to record income tax expense, current and deferred, for 2022.

Income Tax Expense – Current 1,560,000

Deferred Tax Asset 600,000
Deferred Tax Liability 185,000
Income Tax Expense – Deferred (Benefit) 415,000
Income Tax Payable 1,560,000
30% x 5,200,000 = 1,560,000
30% x 2,000,000 = 600,000
(30% x 500,000) + (35% x 100,000) = 185,000