By how much will profit increase

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Question - The following information was extracted from the records of Obduracy Corporation as at 31 December 2021:

Asset (liability)

Carrying amount

Tax base

Accounts receivable

150,000

175,000

Motor vehicles

165,000

125,000

Provision for warranty

(12,000)

0

Deposits received in advance

(15,000)

0

The depreciation rates for accounting and taxation are 15% and 25% respectively. Deposits are taxable when received, and warranty costs are deductible when paid. An allowance for doubtful debts of P25,000 has been raised against accounts receivable for accounting purposes, but such debts are deductible only when written off as uncollectible. The net journal entry to record deferred tax for the year ended 31 December 2021 assuming no deferred items had been raised in prior years, will increase (decrease) profit by how much?

Reference no: EM133075681

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