Problem Quiz - Income Taxes

Due Apr 13 at 3:30pm Points 14 Questions 14

Available until Apr 13 at 11:59pm Time Limit 30 Minutes

Instructions

This quiz was locked Apr 13 at 11:59pm.

Attempt History

Score for this quiz: 9 out of 14

Submitted Apr 13 at 3:29pm

This attempt took 20 minutes.

Compute for what is being asked in each problem. All answers should be in numeric format. For example, 460,000 or 9,000. If your answer is negative, your answer must look like this, -460,000. Don't forget to place comma. Lastly, round off final answers to whole number.

Question 1 1 / 1 pts

MM Company started to manufacture in 2020 copy machines that are sold on installment basis. MM recognizes revenue when equipment is sold for financial reporting purposes, and when installment payments are received for tax purposes. In 2020, MM recognized gross profit of P6,000,000 for financial reporting purposes and P1,500,000 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2021 and 2022 are P2,500,000 and P2,000,000, respectively. MM guarantees the copy machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expenses accrued in 2020 is P2,500,000, but only P500,000 of warranty cost is paid in 2020. It is expected that in 2021 and 2022, P1,000,000 and P1,000,00, respectively,

of warranty costs will be paid. In addition during 2020, P500,000 interest net of 20% final income tax, was received and earned, and P200,000 insurance premium on life insurance policies that covered the life of MM Company’s president was paid. MM is the beneficiary for this policy. The tax rate is 35%. The accounting profit in 2020 was P2,000,000. Assuming any 2020 net loss will be carried over to 2021, how much is the deferred tax asset to be recognized as of December 31, 2020?

Correct! Correct! 980,000

orrect orrect Answers Answers 980,000 (with margin: 0)

Question 2 0 / 1 pts

The following differences enter into the reconciliation of financial income and taxable income of KK Company for the year ended December 31, 2020, its first year of operations

Accounting profit

P4,500,000

Excess tax depreciation

3,000,000

Litigation accrual

450,000

Unearned rent income deferred on the book

but appropriately recognized in taxable income 250,000

Interest income from long-term certificate of deposit 100,000

Additional information:

A. Excess tax depreciation will reverse equally over a four year

period, 2021-2024.

B. It is estimated that the litigation liability will be paid in 2024.

C. Rent income will be recognized during the last year of the lease,

2024.

D. Interest income from long term certificate of deposits is expected to be P100,000 each year until their maturity at the end of 2024.

E. Tax rate is 20%.

Determine the current income tax expense for 2020.

ou ou Answered Answered 460,000

orrect orrect Answers Answers 735,000 (with margin: 0)