Lax Company at the end of 2019, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income P900,000; Estimated litigation expense P1,200,000; Extra depreciation for taxes (P1,800,000); Taxable income P400,000. The estimated litigation expense of P1,200,000 will be deductible in 2020 when it is expected to be paid. Use of the depreciable asset will result in taxable amounts of P600,000 in each of the next three years. The income tax rate is 30% for all years. Income tax payable is A. P0 B. P120,000
Lax Company at the end of 2019, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income P900,000; Estimated litigation expense P1,200,000; Extra depreciation for taxes (P1,800,000); Taxable income P400,000. The estimated litigation expense of P1,200,000 will be deductible in 2020 when it is expected to be paid. Use of the depreciable asset will result in taxable amounts of P600,000 in each of the next three years. The income tax rate is 30% for all years. Income tax payable is A. P0 B. P120,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Lax Company at the end of 2019, its first year of operations, prepared a
reconciliation between pretax financial income and taxable income as
follows: Pretax financial income P900,000; Estimated litigation expense
P1,200,000; Extra
P400,000. The estimated litigation expense of P1,200,000 will be
deductible in 2020 when it is expected to be paid. Use of the depreciable
asset will result in taxable amounts of P600,000 in each of the next three
years. The income tax rate is 30% for all years. Income tax payable is
A. P0
B. P120,000
C. P180,000
D. P270,000
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