*see attached problemREQUIRED:What is the deferred tax balance by the end of 2020? On Jan. 1, 2020, Mandy Company entered into a -year construction contract thathad an estimated gross revenue of Php3,000,000.The entity used the percentage of completion in recognizing income whilethe cost recovery method is used for income tax purposes and the entityreported the following:Construction IncomeAccountingBooksTax Return2020600,000.0020211,500,000.002022900,000.00 3,000,000.00This is the only timing difference between pretax accounting income andtaxable income.The entity reported income before construction income and tax as:20202,400,000.0020213,600,000.0020223,200,000.00Income tax rare30%

Deferred tax refers to the tax difference as per the book profits and taxable income. This tax…

Answered: REQUIRED: What is the deferred tax…

Business

Accounting

REQUIRED: What is the deferred tax balance by the end of 2020?

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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Question

*see attached problem

REQUIRED:

What is the deferred tax balance by the end of 2020?

On Jan. 1, 2020, Mandy Company entered into a -year construction contract that
had an estimated gross revenue of Php3,000,000.
The entity used the percentage of completion in recognizing income while
the cost recovery method is used for income tax purposes and the entity
reported the following:
Construction Income
Accounting
Books
Tax Return
2020
600,000.00
2021
1,500,000.00
2022
900,000.00 3,000,000.00
This is the only timing difference between pretax accounting income and
taxable income.
The entity reported income before construction income and tax as:
2020
2,400,000.00
2021
3,600,000.00
2022
3,200,000.00
Income tax rare
30%

Definition Definition Estimated future tax made while preparing accounts. Deferred tax is estimated based on past and present transactions from financial statements. It is not the actual tax that needs to be paid or is refundable from the revenue authority; it is an accounting entry. It is necessary to account for deferred tax due to difference between accounting profits and taxable profits.

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