PROBLEM 1The following differences enter into the reconciliation of accounting and taxable profitof BLACKPINK Company for the year ended December 31, 2021, its first year of operations.Life insurance expense100,000Excess tax depreciation2,000,000Warranty expense200,000Litigation accrualUnamortized computer software500,0003,000,000Unearned rent income deferredon the books but appropriatelyrecognized in taxable profitInterest income from long-term certificate of deposit400,000200,000Additional information:On July 1, 2021, BLACKPINK paid insurance premium of P200,000 on the life of ana.officer with BLACKPINK Company as beneficiary.b. Excess tax depreciation will reverse equally over a four-year period, 2022-2025.c. The warranty liability is the estimated warranty cost that was recognized as expensein 2021 but deductible for tax purposes when actually paid.d. It is estimated that the litigation liability will be paid in 2025.In January 2021, BLACKPINK Company incurred P4,000,000 of computer software cost.e.Considering the technical feasibility of the project, this cost was capitalizedand amortized over 4 years for accounting purposes. However, the total amount wasexpensed in 2021 for tax purposes.f. Rent income will be recognized during the last year of the lease, 2025.g. Interest income from the long- term certificate of deposit is expected to beP200,000 each year until their maturity at the end of 2025. Interest income fromsuch is tax-exempt.h. Accounting profit for 2021 is P10,000,000. Tax rate is 35%Based on the given information, compute for the following:1. Deferred tax liability2. Deferred tax asset3. Current tax expense4. Total tax expense

Answer 1) Deferred Tax Liability: Particulars Amount Excess tax Depreciation (2,000,000)…

pany fe insurance expense cess tax depreciation 100,000 2,000,000 200,000 rranty expense tigation accrual amortized computer software 500,000 3,000,000 earned rent income deferred on the books but appropriately recognized in taxable profit terest income from long-term certificate of deposit 400,000 200,000

pany fe insurance expense cess tax depreciation 100,000 2,000,000 200,000 rranty expense tigation accrual amortized computer software 500,000 3,000,000 earned rent income deferred on the books but appropriately recognized in taxable profit terest income from long-term certificate of deposit 400,000 200,000

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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