MM Company started to manufacture in 2020 copy machines that are sold on installment basis. MM recognizes revenue when equipment is sold for financial reporting purposes, and when installment payments are received for tax purposes. In 2020, MM recognized gross profit of P6,000,000 for financial reporting purposes and P1,500,000 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2021 and 2022 are P2,500,000 and P2,000,000, respectively. MM guarantees the copy machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expenses accrued in 2020 is P2,500,000, but only P500,000 of warranty cost is paid in 2020. It is expected that in 2021 and 2022, P1,000,000 and P1,000,00, respectively, of warranty costs will be paid. In addition during 2020, P500,000 interest net of 20% final income tax, was received and earned, and P200,000 insurance premium on life insurance policies that covered the life of MM Company’s president was paid. MM is the beneficiary for this policy. The tax rate is 35%. The accounting profit in 2020 was P2,000,000. Assuming any 2020 net loss will be carried over to 2021, how much is the deferred tax asset to be recognized as of December 31, 2020?
MM Company started to manufacture in 2020 copy machines that are sold on installment basis. MM recognizes revenue when equipment is sold for financial reporting purposes, and when installment payments are received for tax purposes. In 2020, MM recognized gross profit of P6,000,000 for financial reporting purposes and P1,500,000 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2021 and 2022 are P2,500,000 and P2,000,000, respectively. MM guarantees the copy machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expenses accrued in 2020 is P2,500,000, but only P500,000 of warranty cost is paid in 2020. It is expected that in 2021 and 2022, P1,000,000 and P1,000,00, respectively, of warranty costs will be paid. In addition during 2020, P500,000 interest net of 20% final income tax, was received and earned, and P200,000 insurance premium on life insurance policies that covered the life of MM Company’s president was paid. MM is the beneficiary for this policy. The tax rate is 35%. The accounting profit in 2020 was P2,000,000. Assuming any 2020 net loss will be carried over to 2021, how much is the
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