XYZ Company manufactures equipment that are sold through installment. XYZ recognizes revenue on the year of sale for financial reporting and when installment payments are received for income tax purposes. In 2020, the company earned a gross profit of P6,000,000 for accounting and P1,500,000 for income tax purposes. In relation to its sales, XYZ also provides warranties for its equipment. Warranty costs are accrued as expense for financial reporting and recognized as deductible expense in the income tax return when paid. Accrued warranty expense for 2020 is P2,500,000, but only P500,000 of warranty costs are actually paid during the year.
XYZ Company manufactures equipment that are sold through installment. XYZ recognizes revenue on the year of sale for financial reporting and when installment payments are received for income tax purposes. In 2020, the company earned a gross profit of P6,000,000 for accounting and P1,500,000 for income tax purposes. In relation to its sales, XYZ also provides warranties for its equipment. Warranty costs are accrued as expense for financial reporting and recognized as deductible expense in the income tax return when paid. Accrued warranty expense for 2020 is P2,500,000, but only P500,000 of warranty costs are actually paid during the year.
Chapter12: Tax Credits And Payments
Section: Chapter Questions
Problem 23P
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XYZ Company manufactures equipment that are sold through installment. XYZ recognizes revenue on the year of sale for financial reporting and when installment payments are received for income tax purposes. In 2020, the company earned a gross profit of P6,000,000 for accounting and P1,500,000 for income tax purposes. In relation to its sales, XYZ also provides warranties for its equipment. Warranty costs are accrued as expense for financial reporting and recognized as deductible expense in the income tax return when paid. Accrued warranty expense for 2020 is P2,500,000, but only P500,000 of warranty costs are actually paid during the year.
In addition, XYZ also earned P500,000 of interest, net of final withholding taxes, from its bank deposits. Interest income subject to final withholding taxes is non-taxable income for income tax purposes. The entity also paid P100,000 insurance premium on the life of its president in relation to an insurance policy where XYZ Company is the beneficiary. Pre-tax financial income is P2,000,000. Any taxable operating loss can be carried forward to 2021. Tax rate is 30%.
How much is the netdeferred tax expense for 2020?
In addition, XYZ also earned P500,000 of interest, net of final withholding taxes, from its bank deposits. Interest income subject to final withholding taxes is non-taxable income for income tax purposes. The entity also paid P100,000 insurance premium on the life of its president in relation to an insurance policy where XYZ Company is the beneficiary. Pre-tax financial income is P2,000,000. Any taxable operating loss can be carried forward to 2021. Tax rate is 30%.
How much is the net
a. 750,000
b. 870,000
c. 480,000
d. Zero
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