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OVE INC. has a policy of using non-current assets until they can no longer operate and are worthless. On January 1, 2015, it acquired an item of plant and machinery for P100,000. It is being depreciated over 10 years on a straight-line basis. For tax purposes, there is an allowance of 20% per annum on a reducing balance basis. There are two rates of tax: 15% on trading profits and 25% on gains on disposals. What deferred tax balance should LOVE recognized at December 31, 2015, according to PAS 12 Income taxes? a. Deferred tax asset of P2,500 b. Deferred tax asset of P1,500 c. Deferred tax liability of P2,500 d. Deferred tax liability of P1,50

OVE INC. has a policy of using non-current assets until they can no longer operate and are worthless. On January 1, 2015, it acquired an item of plant and machinery for P100,000. It is being depreciated over 10 years on a straight-line basis. For tax purposes, there is an allowance of 20% per annum on a reducing balance basis. There are two rates of tax: 15% on trading profits and 25% on gains on disposals. What deferred tax balance should LOVE recognized at December 31, 2015, according to PAS 12 Income taxes? a. Deferred tax asset of P2,500 b. Deferred tax asset of P1,500 c. Deferred tax liability of P2,500 d. Deferred tax liability of P1,50

FINANCIAL ACCOUNTING
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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LOVE INC. has a policy of using non-current assets until they can no longer operate and are worthless. On January 1, 2015, it acquired an item of plant and machinery for P100,000. It is being depreciated over 10 years on a straight-line basis. For tax purposes, there is an allowance of 20% per annum on a reducing balance basis. There are two rates of tax: 15% on trading profits and 25% on gains on disposals.
What deferred tax balance should LOVE recognized at December 31, 2015, according to PAS 12 Income taxes?

a. Deferred tax asset of P2,500
b. Deferred tax asset of P1,500
c. Deferred tax liability of P2,500

d. Deferred tax liability of P1,500.

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