‘INSTRUCTIONS: 1. Please read the questions and cholces carefully. 2, Select the best answer for each of the following items. 3. Er Ene oe letter of your final answer on the attached answer sheet USING BALLPEN ALL IN CAPITAL 4 ae NO ERASURES ALLOWED X Company prepared the following reconciliation for the first year of operations: Pretax financial Income 2,080,000 Nontaxable interest recelved (65,000) Long-term loss accrual in excess of deductible amount 130,000 Depreciation in excess of financial depreciation (325,000) Taxable income (Tax rate is 30%) 1,820,000 ‘What amount should be reported as current tax expense? a, 624,000 ‘5 546,000 b. 604,500 d. 639,600 Wyt20,000 x 204 2. What amount should be reported as total income tax expense? G a. 243,500 624,000 2,080,000 — GF,0C0) x 307. b. 604,500 . 546,000 POPS 7 : ) 3. What amount should be reported as deferred tax liability? a. 97,500 . 58,500 : i b. 117,000 439,000 (2,007 a6/ (a2siecm x 397) 4. What amount should be reported as deferred tax asset? vD a. 67,500 ¢. 117,000 ~ 9 y 97/500 4. 39,000 825;000 x 30/- (11200 x 2077) _A* ite af the flowing differences would result in future taxable amount? a-€xpenses or losses that are deductible before they are recognized in accounting income. . Revenues or gains that are taxable before they are recognized in accounting income. c. Expenses or losses that are deductible after they are recognized in accounting income. d. Revenues or gains that are recognized in accounting income but are never included in taxable income. ‘An entity, cash basis taxpayer, prepares accrual basis financial statements. In the year-end statement of financial position, the deferred tax liabilities increased compared to the prior year. Which of the following changes would cause this increase in deferred tax liabilities? a. An increase in rent receivable b. An increase in warranty obligation c. An increase in prepaid insurance d-An increase in prepaid insurance and increase in rent receivable Because an entity uses different methods to depreciate equipment for accounting and income tax purposes, the entity has temporary differences that will reverse during the next year and add to taxable income. Deferred income taxes that are based on these temporary differences shall be classified as a. Current liability ‘bNoncurrent liability ©. Contra account to noncurrent assets Ia GoD BLESS! Scanned with CamScannerd. Contra account to current assets Deferred tax assets are always netted against deferred tax liabilities. x Deferred tax assets and liabilities may only be classified as noncurrent. ‘ c. Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting process. 4. Deferred tax assets and liabilities are classified as current and noncurrent based 0” expiration date. Pon statement Is true regarding reporting deferred income taxes in the financial statemeffs apes are differences that result in future deductible amount in determining taxable profit in ture periods. a. Taxable temporary and permanent differences b. Deductible temporary and permanent differences c-Deductible temporary differences 4. Taxable temporary differences 19.fis the amount of income tax payable in respect of taxable profit. a. Deferred tax expense b. Deferred tax benefit, ¢-Current tax expense d. Total income tax expense (Which statement is incorrect concerning tax assets and liabilities? B- Deferred tax assets and liabilities shall be discounted. b. Tax assets and liabilities shall be presented separately from other assets and liabilities in the statement of financial positi 4 tail 5 fi Deferred tax assets and liabilities shall be distinguished from current tax assets and liabilities. d. When an entity makes a distinction between current and noncurrent assets and liabilities, it shall not classify deferred tax assets and liabilities as current. ° 12.Which statement is true regarding reporting deferred income taxes in the financial statements? ‘ac Deferred tax assets are always netted against deferred tax liabilities. b. Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting process. © c. Deferred tax assets and liabilities may only be classified as noncurrent. d. Deferred tax assets and liabilities are classified as current and noncurrent based on expiration date. pie are differences that result in future deductible amount in determining taxable profit in future periods. a. Taxable temporary and permanent differences b. Deductible temporary and permanent differences c. Taxable temporary differences d, Deductible temporary differences 14 These are differences that will result in future taxable amount in determining taxable income of future periods. a. Temporary differences Taxable temporary differences c. Deductible temporary differences d. Permanent differences 2 an ater | Scanned with CamScannerPAll of the following is considered as permanent difference, which is the exception? poet Tax, penalty or surcharge. Dividend received from domestic corporation subject to a final withholding tax. & Excess tax depreciation over accounting depreciation. d. Interest income from the bank ‘subject to final withholding tax e January 2, 2022, an entity entered into an agreement to sell a machine to a bank and lease it for a period of 3 years. At that time, the main facts about the machine and the lease Were: Selling price, P3,000,000, carrying amount, P1,050,000, Fair value, 3,000,000, temaining economic life, 30 years; lease payments, P345,000 (payable in arrears on December 31 each year). Interest rate implicit in the lease Is 8%. In accounting for the arrangement, the seller-lessee would recognize a gain or loss for the year ended December 31, 2022 Of; 3,cc0 a. 1,950,000 gain . P1,950,000 loss 345,c00 x 2.677 = B89, Ged De P1,372,108 gain d. P1,372,108 loss ‘aang SaBtEE 2 8198S / 2.030.609 © WOFO,CCO _777.Using the same information above, the seller-lessee should recognize; {7 26° © P311,173 cost Right of Use Asset TWO! 1450-600 0 b. 71,125 Interest expense in December 31, 2023 ¢c. 240,000 finance cost d. P200,000 depreciation expense f99, 006 / 3001600 X 1,0TO.00D (8. Under the operating lease model of the buyer-lessor books of account as of Dec. 31, 2022, the rent income and depreciation expense respectively, should be; -& P345,000; P100,000 b. P71,125; 103,730 g000.000 | 20 ye = (eE,000 "~ deweciction eo arret c. P345,000; P103,730 SHG.CLO OHS teat incowe d, P71,125; P100,000 7 es on the above data; how much is the right transferred to the buyer-lessor over the mi nachine? a. P889,065 2P2,110,935 b. P3,000,000 4. P1,050,000 Pee Company used leases as the primary method of selling products. The entity's main product is a small aircraft that is very popular among government officials and corporate executives. X Company constructed such aircraft for a President of a big corporation at a cost of 12,000,000. The terms of the lease provided for annual rental of P4,993,065 to be paid over 5 years every December 31 of each year with the ownership of the aircraft transferring to the lessee at the end of the lease term. It is estimated that the aircraft will have a residual value + of P750,000 after 5 years. X Company incurred initial direct costs of P300,000 in finalizing the lease with the lessee. Financing the construction was at a 12% rate. The present value of an ordinary annuity of 1 for 5 periods at 12% is 3.605. The total unearned financial revenue should be; wansous x Fs Oy, 4993,005 v BG05 = (I a. 4,643,550 c. 6,036,615 a DB: 6,965,325 d. 7,465,325 _JIE The manufacturer proft to be recognized immediately should be C a. 18,000,000 5,700,000 ae b. 12,000,000 d. 7,200,000 Ta Pipa the interest income for the first year. a, 2,160,000 c. 1,800,000 b. 1,440,000 d. 1,200,000 Weeo eon! Fad, I3 GOD BLESS!!! Scanned with CamScanner23,0n January 1, 2020, X Company entered into a direct financing lease. A third party guarants Pte residual value of the asset under the lease estimated to be P1,560,000 on January 1, 2025, the end of the lease term. Annual lease payments are P 1,300,000 due each December 31, beginning December 31, 2020. The last payment is due December 31, 2024. The remaining useful life of the asset was six years at the commencement of the lease. The lessor used 10% as the implicit interest rate. The PV of 1 at 10% for 5 periods is .62, and the PV of an ordinary annuity of 1 at 10% for 5 periods is 3.79, ‘What is the net lease receivable of the lessor at the commencement of the lease? 85,894,200 c. 4,927,000 1200.009 ¥ 3:74 > 4,427,@0 b. 6,487,000 d. 3,367,000 WSACIO wy 0.02 01,260 “Ging2c0 iat is the gross investment in the lease? a. 6,500,000 £. 8,060,000 W3e0,000 x F = @,300,000 b. 4,940,000 d. 7,467,200 PAREELCOO f 0x0, GOH prt is the total unearned interest income? a. 3,133,000 -€ 2,165,800 2,060,000 b. 1,573,000 d, 605,800 tay 200 2,NS, 800 What is the interest income for 2020? a. 497,700 ¢. 676,000 $184,200 x 10/7, b-589,420 d. 650,000 the beginning of current year, X Company sold a building with remaining useful life of (20) years and immediately leased it back for 5 years. Sale price at below fair value 18,000,000 SY — ecso.cc0 “Fair value of building 20,000,000 . Carrying amount of building 24,000,000 Annual rental payable at the end of each year 1,000,000 Implicit interest rate 12% Present value of an ordinary annuity of Lat 12% for 5 periods 3.60 What is the Total lease liability? a. 3,600,000 4,000,000. © 1s0rOecd #6. F e,eon.e08 b. 4,800,000 85,600,000 sepahica! voi) Binet the cost of right of use asset? a. 5,600,000 6. 20,000,000 guecracr/2o,000 crow 24,e00.C08 4; 6,720,000 d. 24,000,000 pina is the loss on right transferred to buyer-lessor? a. 1,120,000 52,880,000 . 3,120,000 d. 4,000,000 wv = Hiyeo.eco /20.00 100% 4,090 ,c0t Scanned with CamScanner/hat is the interest expense of the seller-lessee for the second year? 363,840 cc. 287,501 3420/0005 6. 432/000 . 202,001 Y penecD PED —FwhCOO 3.522,c09 2 1000,000 MEY CHK 2,395,240) 31, What is the annual depreciation expense of the buyer-lessor? '. 720,000 . 600,000 i b-800,000 d. 3,600,000 No)/ t8.6t 32-Which statement characterizes an operating lease? @. The lessee records depreciation and interest. b. The lessee records lease obligation . The lessor transfers title of the underlying asset to the lessee for the duration of the lease term. d-The lessor records depreciation and lease revenue. The primary difference between a direct financing lease and a sales type lease is the B¢Recognition of the manufacturer or dealer profit at the inception of the lease b. Manner in which rental collection are recorded as a rental income . Depreciation recorded each year by the lessor 4\G. Allocation of initial direct costs incurred by the lessor over the lease term /hat is the treatment of an unguaranteed residual value in determining the cost of goods sold under a sales type lease? a. The unguaranteed residual value is ignored. b. The unguaranteed residual value is added to the cost of the underlying asset. ¢. The unguaranteed residual value is deducted from the cost of the underlying asset at absolute amount. d-“The unguaranteed residual value is deducted from the cost of the underlying asset at present value. j Povese a direct financing lease, the excess of aggregate rentals over the cost of the underlying asset should be recognized as interest income of the lessor a. In increasing amounts during the term of the lease b. In constant amounts during the term of the lease een decreasing amounts during the term of the lease d. After the cost of the underlying asset has been fully recovered through rentals, Boat investment in a direct financing lease is equal to a. Cost of the asset beCost of the asset plus initial direct cost paid by the lessor . Cost of the asset minus guaranteed residual value 4. Cost of the asset plus unguaranteed residual value See investment in the lease is equal to "3cSum of the lease payments receivable by a lessor under a finance lease and any unguaranteed residual value accruing to the lessor. b. The lease payments under a finance lease of the lessor. . Present value of lease payments under a finance lease of the lessor and any unguaranteed residual value. d_ Present value of the lease payments under a finance lease of the lessor. 3 . The excess of the fair value of underlying asset at the inception of the lease over the carrying amount shall be recognized by the dealer lessor as a. Manufacturer profit from a sales type lease Scanned with CamScannerb. Manufacturer profit from a direct financing lease c. Unearned income from a sales type lease d,. Unearned income from a direct financing lease Beta ease that is recorded as a sales type lease by the lessor, interest revenue acShall be recognized over the lease term using the interest method b. Shall be recognized over the lease term using the straight-line method cc. Shall be recognized in full as revenue at the inception of the lease d. Does not arise 40,2¢ is the income for a period before deducting tax expense. a. Gross profit b. Net profit cAccounting income d. Taxable income Scanned with CamScanner