GUCCI Corp. in its first year of operations has the following differences between the carrying value and tax base of its assets and liabilities at the end of 20x6. Carrying Value P 800,000 Tax Base P 680,000 Equipment (net) Estimated warranty liability GUCCI estimates that the warranty liability will be settled in 20x7 40,000 PO The difference in equipment (net) will result in taxable amounts as shown below Year Amount P 40,000 60,000 20x7 20x8 20x9 20,000 The company has taxable income of P 800,000 for 2016. The income tax rate is 30%.

GUCCI Corp. in its first year of operations has the following differences between the carrying value and tax base of its assets and liabilities at the end of 20x6. Carrying Value P 800,000 Tax Base P 680,000 Equipment (net) Estimated warranty liability GUCCI estimates that the warranty liability will be settled in 20x7 40,000 PO The difference in equipment (net) will result in taxable amounts as shown below Year Amount P 40,000 60,000 20x7 20x8 20x9 20,000 The company has taxable income of P 800,000 for 2016. The income tax rate is 30%.

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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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

1. What is the total deferred tax liability at December 31, 20x6?

2. What is the total deferred tax asset at December 31, 20x6?

3. What is the current income tax expense for the year ended December 31,

4. What is the total income tax expense for 20x6?

GUCCI Corp. in its first year of operations has the following differences between the carrying value and tax base of its assets
and liabilities at the end of 20x6.
Carrying Value
Tax Base
P 800,000
P 680,000
Equipment (net)
Estimated warranty liability
GUCCI estimates that the warranty liability will be settled in 20x7
The difference in equipment (net) will result in taxable amounts as shown below
40,000
PO
Year
Amount
20x7
P 40,000
20x8
60,000
20x9
20,000
The company has taxable income of P 800,000 for 2016. The income tax rate is 30%.

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.

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