Gaa, Jayson M.

A-531
Deferred Tax
(NFJPIA MOCKBOARD 2011)
1. The following facts relate to Whammy Corporation for the year 2010:
Deferred tax liability, January 1, P48,000
Deferred tax asset, January 1, P16,000.
Taxable income for the year, P430,000.
Cumulative temporary difference at December 31, giving rise to
future taxable amounts, P230,000.
Cumulative temporary difference at December 31, giving rise to the
future deductible amounts, P95,000.
Tax rate for all years, 35%.
No permanent differences exist. The company is expected to operate
profitably in the future. What is the total tax expense?.
Solution:
15050
0

Current Tax(430000 x 35%)

Inc. In DTL
32500
Inc. In DTA
17250
Total tax
expense

15250
16575
0

(Practical Accounting 1 Mockboard)

2. Mayen Company reported total tax expense of P2,000,000 in its 2012
statement of comprehensive income. The following changes in Mayens tax
assets and liabilities re available:
December 31, 2012
2011
Deferred tax asset
Income tax payable
Deferred tax liability

150,000
300,000
250,000

December 31,
350,000
600,000
500,000

The deferred tax liability was caused by accelerated depreciation and the
deferred tax asset is for rentals received in advances. What is the current tax
expense for 2012?
Solution:
Current Tax(430000 x 35%)
Change In
DTL
200,000.00
Change In
DTA
250,000.00

2,050,000
.00

(50,000.0

squee
ze

0)
Total tax
expense

2,000,000
.00

3. The following information was taken from Hedonistic Corporations 2011

income statements:
Income before income taxes
5,000,000
Income tax expense:
Current
Deferred
Net income

1,200,000
150,000

1,350,000
3,650,000

Hedonistic first year of operations was in 2011. The entity has a 30% tax
rate. The deferred tax expense is the net total of deductible temporary
differences of P200,000 and taxable temporary differences of P700,000. Also
during the year, Hedonistic received dividends of P500,000 from its
investments in domestic corporation. No other differences existed between
accounting income and taxable income. What was the taxable income for
2011?
Solution:
Taxable income (1,200,000 / 30%)

P4,000,000

(NFJPIA 2013 Mockboard)

4. The JP Inc. operations resulted to regular corporate income tax (RCIT)
amounting to P25,000, with the minimum corporate income tax (MCIT)
computed at P100,000. It is the first time that JP will be paying MCIT after
operating for 7 years. The RCIT rate is 30% while MCIT rate is 2%. If JP
expects that the company will be liable to MCIT next year, deferred tax asset
to be recognized on the balance sheet for the year will be ?
Solution:
----- 0 -----(2015 National Mockboard)
5. The following facts relate to MJ Company
Deferred tax liability, January 1, 2014; P510,000:
Deferred tax asset, January 1, 2014; P120,000
Pretax financial income for 2014; P2,000,000

Non-taxable revenues, P340,000; Non-deductible expenses, P210,000

Cumulative difference at December 31, 2014, giving rise to future taxable
amounts, P1,460,000
Cumulative difference at December 31, 2014, giving rise to future
deductible amounts, P510,000
Tax rate for current and future years 30%
The deferred tax asset on December 31, 2014 is
Solution:
DTA, end (510,000 x 30%)

P153,000

(2015 Regional Mockboard)

6. Jason Company has taken out a foreign loan of $100,000 that is recorded at
P4,400,000. At the reporting date, the carrying value of the loan is
P4,000,000. The unrealized exchange gain of P400,000 is included in profit
or loss, but will be taxable when the gain is realized on the repayment of the
loan. If the current and future tax rates are 34% and 35%, respectively, what
amount of deferred tax liability should the company recognize?
Solution:
DTL (400,000 x 35%)

P140,000

(auditing problems roque)

Isay Inc. began operating on January 1, 2014. At the end of the first year of
operation Isay reported P 7,500,000 income before income taxes on its
income statement but only P700,000 taxable income on its tax return.
Analysis of the P 6,800,000 difference revealed that P 6200000 was a
permanent difference and P 600,000 was a temporary difference related to a
current asset. At the end of 2015, the accumulated temporary difference
related to future years is P1,100,000. Tax rate is 30%.
7. What is the adjustment on the DTL at the end of 2015?
8. Assume that at the end of 2015 the accumulated temporary difference
related to future years is P550,000, what is the adjustment in DTL?
Solution:
(7) DTL, Dec. 31, 2015(1,100,000 x 30%)
P330,000
DTL, Dec. 31,2014(600,000 x 30%)
180,000
Inc. in DTL
P150,000
(8) DTL, Dec. 31, 2015(550,000 x 30%)
P165,000

DTL, Dec. 31,2014(600,000 x 30%)

180,000
Dec. in DTL
(P15,000)
At Dec. 31, 2014; the company has a P900000 liability reported for estimated
litifation claims. This balance represents amounts that have been charged to
income but are not tax deductible until they are paid. The company epects to
pay the claims and thus have a tax deductible in the future by P150,000 at
2017, P690000 at 2018 and P60000 at 2019.
The company uses different depreciation method for financila reporting and
tax purposes. At Dec. 31, 2014 the company has a cumulative temporary
difference due to depreciable property of P2,400,000. This P2,400,000
cumulative temporary difference is to result in taxable amounts in the future
of equal amounts from 2015 to 2019.
Tax rate is 30%. Taxable income for 2014 is P2,400,000, the company expects
to report taxable income for the next five years. No temporary difference
existed at the end of 2013.

Solve for the follwing for December 31, 2014:

9. DTL
10.DTA
11.Current income tax payable
12.Pre-tax accounting income
13.Net income
Solution:
(9)DTL (480000x5x30%)

P720,000

(10)DTA(900000x30%)

P270,000

(11)Income tax payable(2400000x30%)

P720,000
(12)

taxable income
Difference in Depreciation
Difference from Litigation
Pre-tax income

(13)

Pretax Income
Income tax expense(720000+450000)
Net Income

P2,400,000
2,400,000
(900,000)
P3,900,000
P3,900,000
(1,170,000)
P2,730,000

YOURWORTHIT INC. in its first year of operations, has the ff. differences
between the carrying value and tax base of its of its assets and liabilities at
the end of 2014:

Equipment
Estimated warranty
liability

Carrying value
P800,000
400,000

Tax Base
P680,000
-0-

Warranty liability is expected to be settled in 2015. While difference in

equipment will be taxable by P40,000, P60,000, P20,000 in 2015,2016 and
2017 respectively. The company incurred P1,040,000 taxable income. Tax
rate is 30%
Compute the ff. in Dec. 31, 2014:
14.DTL
15.DTA
16.Current tax expense
17.Total Income Tax
Solution:
(14) DTL (240000 x 30%)
(15) DTA (400000 x 30%)
(16) Current tax exp. (1040000 x 30%)
P312,000
(17) Current tax exp.
P312,000
DTL
DTA
Income tax expense
P228,000

P36,000
P120,000

36,000
(120,000)

At Dec. 31, 2013, Galaga Corp. had a temporary difference (related to

depreciation) and reported a related deferred tax liability of P60,000 on its
statment of financial position. At december 31, 2014 Galaga has four
temporary difference:
Temporary
Future taxable(deductable) Amounts
Difference
2014
2015
Later year
1. Difference in depreciation for
P160,000
P220,000
P760,000
accounting and tax purposes
2. Rent collected in advance
(380,000)
3. Accrued expenses
(90,000)
4. Installment sales
276,000
210,000
Total
(P34000)
P430,000
P760,000
Assume income tax of P435,000 for 2014. Installment receivable collctible in
2016 is classified as non-current. Tax rate is 30%. Compute the ff. amount in
Dec. 31, 2014:
18.DTA

19.DTL
20.Pretax accounting income
21.Net Income
Solution:
(18)DTA ( 470000 x 30%)
(19)DTL ( 1626000 x 30%)
P487,800
(20) Taxable Inc. (435000/30%)
P1,450,000
Excess Depreciation
940,000
Excess Rent
Excess Expenses
Excess Income
486,000
Pretax Accounting Income
P2,406,000
(21)Net Income (2406000-(427800+286800))
P1,684,200

P141,000

(380,000)
(90,000)

(Practice Problems-Income Tax Accounting)

Smith Company reported P350,000 in income before income tax for book
purposes in 2010, itsfirst year of operation. The tax depreciation exceeded its
book depreciation by P30,000. The tax rate for 2010 and all future years was
40%. Assume depreciation expense is the only temporary difference.
22.What amount of deferred income tax liability should Smith report in its
December 31, 2010, balance sheet?
23.What amount of income taxes payable (i.e., current tax expense) should
Smith report in its December 31, 2010, balance sheet?
24.Income tax expense reported on the income statement would be?
Solution:
(22) DTL (30000 x 40%)
(23)Current tax ((350000-30000) x 40%)
P128,000
(24)Total Expense(128000+12000)

P12,000
P140,000

25.During 2009, a company reported an increase in the deferred tax liability

account of P77,990, an increase in thedeferred tax asset account of P35,325,
and an income tax payable liability as per the 2009 income tax return
of P398,555. What is the income tax expense to be reported on the income
statement for the year ending December 31, 2009?
Solution:
Income tax Expense (398555+77990-35325)

P441,220