29. Matthew Company startedto manufacture in 2012copying machines that aresold on the installment basis.Matthew recognizes revenuewhen equipment is sold forfinancial reporting purposesand when installmentpayments are received for taxpurposes. In 2012, Matthewrecognized gross profit ofP10,000,000 for financialreporting purposes andP6,000,00 for tax purposes.The amounts of gross profitexpected to be recognized fortax purposes in 2013 and 2014is P2,000,000 each. Matthewguarantees the copyingmachines for two years.Warranty costs are recognizedon the accrual basis forfinancial accounting purposesand when paid for taxpurposes. Warranty expenseaccrued in 2012 is P2,800,000but only P1,000,000 of thewarranty cost was paid in2012. It is expected that in2013 and 2014, P1,100,000 andP700,000, respectively, ofwarranty costs will be paid. Inaddition, during 2012,P500,000 interest, net of 20%final income tax, was receivedand earned, and P200,000insurance premium on lifeinsurance policy that coveredthe life of Matthew Company'spresident was paid. Matthew isthe beneficiary of this policy.The tax rate has been 30%;accounting income in 2012was P5,000,000.AssumingMatthew has not made any taxpayments in 2012 yet, howmuch is its income taxpayable? *a. P750,000b. P840,000c. P930,000d. P1,410,000

Income tax:Income tax is based on income. Suppose a person has salary income, capital gain income,…

Answered: 29. Matthew Company started to…

29. Matthew Company started to manufacture in 2012 copying machines that are sold on the installment basis. Matthew recognizes revenue when equipment is sold for financial reporting purposes

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter3: Taxes On The Financial Statements

Section: Chapter Questions

Problem 3BCRQ

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