The pretax financial income of Wew Corporation differs from its taxable income throughout each of the two years as follows: 2019 2020 Pretax financial income P290,000 P320,000 Taxable income 180,000 225,000 Tax rate 30% 25% Pretax financial income for each year includes a non-deductible expense of P30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2019. The change in the tax rate to 25% was not enacted until the beginning of 2020. Based on the information above, answer the following: How much is the increase/decrease in the deferred tax expense as a result of the change in the tax rate at the beginning of 2020 to the deferred tax expense (aka 'catch-up adjustment')? What is the total income tax expense for the year ended December 31, 2020?
The pretax financial income of Wew Corporation differs from its taxable income throughout each of the two years as follows: 2019 2020 Pretax financial income P290,000 P320,000 Taxable income 180,000 225,000 Tax rate 30% 25% Pretax financial income for each year includes a non-deductible expense of P30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one depreciation temporary difference. No deferred income taxes existed at the beginning of 2019. The change in the tax rate to 25% was not enacted until the beginning of 2020. Based on the information above, answer the following: How much is the increase/decrease in the deferred tax expense as a result of the change in the tax rate at the beginning of 2020 to the deferred tax expense (aka 'catch-up adjustment')? What is the total income tax expense for the year ended December 31, 2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The pretax financial income of Wew Corporation differs from its taxable income throughout each of the two years as follows:
| 2019 | 2020 | |
| Pretax financial income | P290,000 | P320,000 |
| Taxable income | 180,000 | 225,000 |
| Tax rate | 30% | 25% |
Pretax financial income for each year includes a non-deductible expense of P30,000 (never deductible for tax purposes). The remainder of the difference between pretax financial income and taxable income in each period is due to one
The change in the tax rate to 25% was not enacted until the beginning of 2020.
Based on the information above, answer the following:
- How much is the increase/decrease in the
deferred tax expense as a result of the change in the tax rate at the beginning of 2020 to the deferred tax expense (aka 'catch-up adjustment')? - What is the total income tax expense for the year ended December 31, 2020?
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