UNMIK practice of Kosovo’s foreign relations: a new way to create an International Law Frankestein?
4. El ejercicio de las relaciones exteriores por la administración internacional
a. The provision for income taxes should be based on business income using individual taxes rates.
b. The provision for income taxes should be based on business income using corporate tax rates.
c. The provision for income taxes should be based on the proprietor’s total taxable income.
d. No provision for income taxes is required.
Problem 15-8 (ACP)
ABC Company reported pretax financial income of P2, 000,000 for the year ended December 31, 2015. The taxable income was P1, 500,000. The difference is due to accelerated depreciation for the income tax purposes.
The income tax rate is 30% and ABC company made estimated tax payment of P200,000 during the current year.
Required:
a. Prepare journal entries for 2015.
b. Compute the total income tax expense for 2015.
Problem 15-9 (ACP)
Simplex Company reported the following information for the year ended December 31, 2015:
Operating loss (1,000,000)
Interest income on note receivable 1,100,000 Loss on inventory writedown ( 300,000)
Loss before income tax ( 200,000)
There are no temporary differences at the beginning of the year. The income tax rate is 30 %.
Required:
1. Prepare journal entry to record the income tax expense and deferred tax for 2015.
2. Present the income tax expense in the income statement.
Problem 15-10 (ACP)
Zeus Company reported pretax financial income of P3,000,000 for the year ended December 31, 2015. The taxable income was P4,000,000.
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. Prepare journal entries relating to income tax for 2015.
b. Compute the total income tax expense for 2015.
Problem 15-11 (ACP)
In 2015, Argentina Company received an advance payment of P1,000,000, which was subject to tax but not supported in accounting income until 2016.
The income tax rate is 30%.
The income tax statement and tax return showed the following:
2015 2016
Income before tax per income statement 6,000,000 9,000,000
Income before tax per return 7,000,000 8,000,000
Required:
1. Prepare journal entries to record the income tax and deferred tax for 2015 and 2016
2. Present the income tax expense in the income statement for 2015 and 2016.
Problem 15-12 (ACP)
Colombo Company included in 2015 a deferred income on installment sale of P500,000 in accounting income. This deferred income is expected to reverse for tax purposes in 2016. The income statement and tax return showed the following:
2015 2016
Accounting income 5,500,000 7,000,000
Taxable income 5,000,000 7,500,000
Required:
1. Prepare journal entries to record the income tax and deferred tax for 2015 and 2016.
2. Present the income tax expense in the income statement for 2015 and 2016.
Problem 15-13 (ACP)
Xavier Company provided the following information for the first year of operations:
Accounting income 4,000,000
Nondeductible expenses 200,000
Nontaxable revenue 300,000
Deferred income on installment sale included
in financial income but taxable next year 450,000
Doubtful accounts recorded 100,000
Financial depreciation 300,000
Tax depreciation 350,000
Estimated warranty cost accrued in the current year
but not deductible for tax purpose until paid 100,000
Income tax rate 30%
Required:
1. Prepare journal entry to record the current tax expense.
2. Prepare journal entry to record the deferred tax liability.
3. Prepare journal entry to record the deferred tax asset.
4. Present income tax expense in income statement.
5. Determine the net deferred tax expense or benefit.
Problem 15-14 (IAA)
On January 1, 2015, Valley Company entered into a 3-year construction contract that had an estimated gross revenue of P3,000,000.
The entity used the percentage of completion method in recognizing income on its book and reported construction income as follows:
2015 600,000
2016 1,500,000
2017 900,000
The cost recovery method is used for income tax purposes and the entity reported construction income on the tax return as follows:
2015 2016
2017 3,000,000
This is the only timing difference income before construction income and tax as follows:
2015 2,400,000
2016 3,600,000
2017 3,200,000
Required:
Prepare journal entries to record income tax and deferred tax for 2015, 2016, and 2017. The income tax rate is 30%.
Problem 15-15 (IAA)
On January 1, 2015, aye Company purchased an equipment for P1,000,000.
The equipment has an estimated useful life of 4 years and no residual value.
The entity used the straight line method of depreciation for accounting purposes and the SYD method for tax purposes.
The comparative depreciation charges for each of the four years are:
Straight line SYD
2015 250,000 400,000
2016 250,000 300,000
2017 250,000 200,000
2018 250,000 100,000
The depreciation charge is the only timing differences between accounting income and taxable income.
Aye Company generated P4,000,000 income before depreciation and tax for each of the four years and that the applicable tax rate is 30%.
Required:
1. Prepare journal entries to record income tax and deferred tax for each of the four years.
2. Present the deferred tax liability on December 31, 2016.
Problem 15-16 (IAA)
Complex Company recorded the following information relating to income before tax for accounting purposes:
2015 2,000,000
2016 3,000,000
2017 4,000,000
2018 5,000,000
In 2015, the entity recognized doubtful accounts of P100,000. Such accounts were considered worthless or uncollectible in 2016.
Analysis of the tax and books records disclosed P120,000 in unearned rent income on December 31,2015 that has been recognized as taxable income in 2015 when the cash was received.
Also on December 31, 2015, estimated warranty cost of P300,000 had been recognized as expense on the books in 2015 when the product sales were made but is not deductible for tax purpose until paid.
The unearned rent income on December 31, 2015 is realized and the actual warranty payments were made as follows:
Rent income per book Actual warranty payments
2016 40,000 20,000
2017 40,000 80,000
2018 40,000 200,000
Required:
Prepare journal entries for 2015, 2016, 2017 and 2018 to record income tax expense and deferred income tax arising from the temporary differences.
The income rate is 30%.
2. Present the deferred tax asset on December 31, 2016.
Problem 15-17 (ACP)
Shangri-La Company reported a pretax accounting income of P7,900,000 for the year ended December 31 2015. Temporary differences have been identified as follows.
Tax depreciation in excess accounting depreciation 1,000,000
Litigation loss accrued for financial accounting Purposes but will be deducted for tax purposes
In the distance future 400,000
Warranty cost expensed for financial accounting
Purposes exceeded the amount currently deducted
For tax purposes by 300,000
The warranty liability is classified as a current liability in the entity’s statement of financial position. The income tax rate is 30%.
There are no temporary differences at the beginning of the current year.
Required:
1. Prepare journal entries to record the income tax and deferred tax for 2015.
2. Prepare a partial income statement and partial statement of financial position to show the income tax expensed and deferred tax amount.
The entity has no legal enforceable right to set off a current tax asset against a current tax liability.
3. Determine the net deferred tax expense or benefit.
Problem 15-18 (IFRS)
On December 31, 2015, the statements of financial position accounts of Simple Company have the same basis for accounting and tax purposes, except the following:
Carrying amount Tax base Difference Computer software cost 4,000,000 0 4,000,000
Equipment 15,000,000 12,000,000 3,000,000
Accrued liability-health care 2,000,000 0 2,000,000
In January 2015, the entity incurred cost of P6,000,000 in relation to the development of a computer software product. Considering the technical feasibility of the product, this cost was capitalized and amortized over 3 years for accounting purpose using straight line. However, the total amount was expensed in 2015 for tax purposes.
The equipment was acquired on January 1, 2015 for P20,000,000. The useful life of the equipment is 4 years with no residual value. The equipment is depreciated using the straight line for accounting purposes and sum of 4 year’s digits method for tax purposes.
In January 2015, the entity entered into an agreement with the employees to provide health care benefits the cost of such plan for 2015 was P2,000,000. This amount was accrued as an expense in 2015 for accounting purposes. However, health care benefits are deductible for tax purposes only when actually paid.
The pretax accounting income for 2015 is P13,000,000. The tax rate is 30% and assume there are no deferred taxes on January 1, 2015.
Required:
1. Prepare journal entries to record the deferred tax liability, deferred tax asset and current tax expense.
2. Present the income tax expense in the income statement.
Problem 15-19 (IFRS)
On January 1, 2012, Easy Company acquired an equipment for P8,000,000. The equipment is depreciated using straight line method based on useful life of 8 years with no residual value.
On January 1, 2015, after 3 years, the equipment was revalued at a replacement cost of P12,000,000 with no change in useful life.
The pretax accounting income before depreciation for 2015 is P10,000,000. The income tax rate is 30% and there are no other temporary differences at the beginning of the year.
Required:
1. Prepare journal entry to record the revaluation on January 1, 2015.
2. Prepare journal entry to record the deferred tax liability on January 1, 2015.
3. Prepare journal entry to record the current tax expense for 2015.
4. Prepare the adjustment of the deferred tax liability on December 31, 2015.
5. Prepare the adjustment if the revaluation surplus on December 31, 2015.
6. Prepare the income tax expense in the income statement for 2015.
Problem 15-20 (IFRS)
Aloha Company provided the following information on December 31, 2015:
Carrying Amount Tax base
Accounts receivable 1,500,000 1,750,000
Motor vehicle 1,650,000 1,250,000
Provision for warranty 120,000 0
Deposits received in advance 150,000 0 The depreciation rates for accounting and taxation are 15% and 25% respectively.
The deposits are taxable when received and warranty costs are deductible when paid,
An allowance for doubtful accounts of P250,000 has been raised against accounts receivable for accounting purposes but such accounts are deductible only when written off as uncollectible.
The entity showed net income of P8,000,000 in the income statement for 2015.
There are no temporary differences at the beginning of the current year. The tax rate is 30%.
Required:
1. Determine the deferred tax liability on December 31, 2015.
2. Determine the deferred tax asset on December 31, 2015.
3. Determine the net deferred tax expense or benefit.
4. Determine the current tax expense for 2015.
5. Determine the total income tax expense for 2015.
Problem 15-21 (IFRS)
West Company disclosed the following assets and liabilities at carrying amount on December 31, 2015:
Property 10,000,000
Plant and equipment 5,000,000
Inventory 4,000,000
Trade receivables 3,000,000
Trade payables 6,000,000
Cash 2,000,000
The value for tax purposes for property plant and equipment was P7, 000, 000 and P4,000,000 respectively.
The entity has made a provision for inventory obsolescence of P2, 000, 000 which is not allowable for tax purposes.
Further, an impairment charge against trade receivable of P1, 000, 000 has been made. This charge will not be allowed in the current year for tax purposes.
West company reported net income of P9, 000,000 for 2015 there no temporary differences at the beginning of the current year. The tax rate is 30%.
Required:
1. Prepare journal entry to record the current tax expenses.
2. Prepare journal entry to record the deferred tax liability.
3. Prepare journal entry to record the deferred tax assets.
4. Determine the net deferred tax expense or benefit.
5.Determine the total income tax expense.