INCOME TAX AND

DEFERRED TAX
LECTURE 6
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Problem 1
During the current year, Tiger Company reported pretax financial income of
P5,000,000. Included in the pretax financial income are P900,000 of nontaxable life
insurance proceeds received as a result of the death of an officer, P1,200,000 of
estimated warranty expense accrued at year-end and P200,000 of life insurance
premiums for a policy for an officer. ‘-

No income tax was previously paid during the year and the income tax rate is 30%

1. What is the income tax payable at the year-end?

2. What is the total expense?

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Problem 2
Pine Company reported pretax financial income of P800,000 for the current year.
In the computation of income taxes, the following data were considered:
Nontaxable gain 350,000
Depreciation deducted for tax purpose in excess of the
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depreciation deducted for book purposes 50,000
Estimated tax payment during the year 70,000
Enacted tax rate 30%
1. What amount should be reported as current tax liability at year-end?
2. What is the total income tax expense?

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Problem 3
Dunn Company reported in the income statement for the current year
P900,000 income before provision for income tax.

Rent received in advance ‘- 150,000

Interest income on time deposit 200,000
Depreciation deducted for income tax purposes
in excess of financial depreciation 100,000
Income tax rate 30%
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1. What is the current provision for income tax for the current year?

2. What is the total tax expense? ‘-

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Problem 4

Jilian Company has a noncurrent asset which had a carrying amount of

P1,800,000 at year-end. The tax written down value of tax base of the asset at
that date was P900,000. The tax rate is 30%.
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What is the deferred tax balance in respect at the asset at year-end?

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Problem 5
At year-end, South Company has revalued a property and has recognized the
increase in the revaluation in the financial statements.

The carrying amount of the property was P8,000,000‘-and the revalued amount
was P10,000,000. However, the tax base of the property was only P6,000,000.
The income tax rate is 30%.

What is the deferred tax asset or liability at year-end?

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Problem 6

On January 1, 2017, Bolton Company reported a deferred tax liability of

P1,000,000 and a deferred tax asset of P400,000.
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On December 31, 2017, the entity reported a deferred tax liability of P1,500,000
and a deferred tax asset of zero.

What is the deferred tax expense for 2017?