In the 30 June 2020 annual report of Johnston Ltd, the equipment was reported as follows: P5,000,000 Accumulated depreciation Equipment (at cost) 1,500,000 P3,500,000 The equipment consisted of two machines, machine A and machine B. Machine A had cost P3,000,000 and had a carrying amount of P1,800,000 at 30 June 2020, while machine B had cost P2,000,000 and was carried at P1,700,000. Both machines are measured using the cost model, and depreciated on a straight- line basis over a ten-year period. On 31 December 2020, the directors of Johnston Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. Machine A was revalued to P1,800,000 with an expected useful life of six years, and machine B was revalued to P1,550,000 with an expected useful life of five years. The amount to be recognized in profit or loss as a result of the revaluation of assets on December 31, 2020 is A. P150,000 (P150,000) B. P100,000 (P 50,000) C. D.

In the 30 June 2020 annual report of Johnston Ltd, the equipment was reported as follows: P5,000,000 Accumulated depreciation Equipment (at cost) 1,500,000 P3,500,000 The equipment consisted of two machines, machine A and machine B. Machine A had cost P3,000,000 and had a carrying amount of P1,800,000 at 30 June 2020, while machine B had cost P2,000,000 and was carried at P1,700,000. Both machines are measured using the cost model, and depreciated on a straight- line basis over a ten-year period. On 31 December 2020, the directors of Johnston Ltd decided to change the basis of measuring the equipment from the cost model to the revaluation model. Machine A was revalued to P1,800,000 with an expected useful life of six years, and machine B was revalued to P1,550,000 with an expected useful life of five years. The amount to be recognized in profit or loss as a result of the revaluation of assets on December 31, 2020 is A. P150,000 (P150,000) B. P100,000 (P 50,000) C. D.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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

In the 30 June 2020 annual report of Johnston Ltd, the equipment was reported as follows:
P5,000,000 Accumulated depreciation
Equipment (at cost)
1,500,000
P3,500,000
The equipment consisted of two machines, machine A and machine B. Machine A had cost P3,000,000 and had a
carrying amount of P1,800,000 at 30 June 2020, while machine B had cost P2,000,000 and was carried at P1,700,000.
Both machines are measured using the cost model, and depreciated on a straight- line basis over a ten-year period.
On 31 December 2020, the directors of Johnston Ltd decided to change the basis of measuring the equipment from
the cost model to the revaluation model. Machine A was revalued to P1,800,000 with an expected useful life of six
years, and machine B was revalued to P1,550,000 with an expected useful life of five years.
The amount to be recognized in profit or loss as a result of the revaluation of assets on December 31, 2020 is
A. P150,000
C. (P150,000)
D. (P 50,000)
B.
P100,000

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