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16. Red Company was organized on January 2, 2002, had pretax accounting income of P1,500,000 and taxable income of P2,400,000 for the year ended December 31, 2002. Red expected to maintain this level of taxable income in future years. The only temporary difference is for accrued product warranty costs expected to be paid as follows: 2003 P300,000 150,000 2005 P150,000 300,000 2004 2006 The applicable enacted income tax rate is 32%. In Red's December 31, 2002 balance sheet, the deferred income tax asset and related valuation allowance should be: Deferred tax asset Valuation alowance Deferred tax asset Valuation allowance (a) (b) PO PO (c) (d) P288,000 PO PO P288,000 P288,000 P288,000

16. Red Company was organized on January 2, 2002, had pretax accounting income of P1,500,000 and taxable income of P2,400,000 for the year ended December 31, 2002. Red expected to maintain this level of taxable income in future years. The only temporary difference is for accrued product warranty costs expected to be paid as follows: 2003 P300,000 150,000 2005 P150,000 300,000 2004 2006 The applicable enacted income tax rate is 32%. In Red's December 31, 2002 balance sheet, the deferred income tax asset and related valuation allowance should be: Deferred tax asset Valuation alowance Deferred tax asset Valuation allowance (a) (b) PO PO (c) (d) P288,000 PO PO P288,000 P288,000 P288,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please solve for RED COMPANY. Thank you.

15. Elf Company prepared the following reconciliations of its pretax financial statement income to taxable income for the year ended December 31, 2000, its first year of operations: Pretax financial income Nontaxable interest received P1,600,000 ( 50,000) Long-term loss accrual in excess of deductible amount 100,000 Depreciation in excess of financial statement income ( 250,000) P1400.000 Taxable income Assume the income tax is 32%, what amount should Elf report as income tax expense current portion of its 2000 income statement? (a) P416,000 (b) P448,000 (c) P496,000 (d) P512,000 B 16. Red Company was organized on January 2, 2002, had pretax accounting income of P1,500,000 and taxable income of P2,400,000 for the year ended December 31, 2002. Red expected to maintain this level of taxable income in future years. The only temporary difference is for accrued product warranty costs expected to be paid as follows: 2003 2004 P300,000 150,000 2005 P150,000 300,000 2006 The applicable enacted income tax rate is 32%. In Red's December 31, 2002 balance sheet, the deferred income tax asset and related valuation allowance should be: Deferred tax asset Valuation allbwance Deferred tax asset Valuation allowance (a) (b) (c) (d) PO PO P288,000 PO PO P288,000 P288,000 P288,000
Transcribed Image Text:15. Elf Company prepared the following reconciliations of its pretax financial statement income to taxable income for the year ended December 31, 2000, its first year of operations: Pretax financial income Nontaxable interest received P1,600,000 ( 50,000) Long-term loss accrual in excess of deductible amount 100,000 Depreciation in excess of financial statement income ( 250,000) P1400.000 Taxable income Assume the income tax is 32%, what amount should Elf report as income tax expense current portion of its 2000 income statement? (a) P416,000 (b) P448,000 (c) P496,000 (d) P512,000 B 16. Red Company was organized on January 2, 2002, had pretax accounting income of P1,500,000 and taxable income of P2,400,000 for the year ended December 31, 2002. Red expected to maintain this level of taxable income in future years. The only temporary difference is for accrued product warranty costs expected to be paid as follows: 2003 2004 P300,000 150,000 2005 P150,000 300,000 2006 The applicable enacted income tax rate is 32%. In Red's December 31, 2002 balance sheet, the deferred income tax asset and related valuation allowance should be: Deferred tax asset Valuation allbwance Deferred tax asset Valuation allowance (a) (b) (c) (d) PO PO P288,000 PO PO P288,000 P288,000 P288,000
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