STARS Company reported net income for the current year 2021 before taxes is #4,288,000. The following differences were noted between the financial reporting and tax reporting: Financial Tax Interest on depository accounts Warranty expense Revenue from installment sales 53,000 260,000 584,000 115,000 319,000 125,000 P Advance collections from customers Provision for probable losses 406,000 Insurance premiums on senior managers' life insurance 182,000 The income tax rate is 30% and is not expected to change in the future. Estimated tax payments for the last three quarters amounted to P920,000.

STARS Company reported net income for the current year 2021 before taxes is #4,288,000. The following differences were noted between the financial reporting and tax reporting: Financial Tax Interest on depository accounts Warranty expense Revenue from installment sales 53,000 260,000 584,000 115,000 319,000 125,000 P Advance collections from customers Provision for probable losses 406,000 Insurance premiums on senior managers' life insurance 182,000 The income tax rate is 30% and is not expected to change in the future. Estimated tax payments for the last three quarters amounted to P920,000.

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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Question

What is the adjusted balance of Deferred tax liability to be reflected in the 2021 statement of financial position?

STARS Company reported net income for the current year 2021 before taxes is #4,288,000. The following differences
were noted between the financial reporting and tax reporting:
Financial
Tax
Interest on depository accounts
Warranty expense
Revenue from installment sales
53,000
260,000
584,000
115,000
319,000
125,000
P
Advance collections from customers
Provision for probable losses
406,000
Insurance premiums on senior managers' life insurance
182,000
The income tax rate is 30% and is not expected to change in the future.
Estimated tax payments for the last three quarters amounted to P920,000.

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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