Answered: he records of Aloha Company on December…

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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PROBLEM 3

The following information was extracted from the records of Aloha Company on December 31, 2021:
Carrying amount Tax base
Accounts receivable P 1,500,000 P 1,750,000
Motor vehicle 1,650,000 1,250,000
Provision for warranty 120,000 Nil
Deposits received in advance 150,000 Nil
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. Alpha Company showed net income of P8,000,000 in its 2021 income statement. There are no temporary differences at the beginning of the current year. The tax rate is 30%.

a. Determine the deferred tax liability on December 31, 2021.

b.Determine the deferred tax asset on December 31, 2021.

c. Determine the current income tax expense.

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