Reference no: EM132831811

Question - Unity Company is in the first year of operations and reported pretax accounting income of P4,000,000. The entity provided the following information for the first year:

Premium on life insurance of key officer 200,000

Depreciation on tax return in excess of book depreciation 200,000

Interest on municipal bonds 50,000

Warranty expense 40,000

Actual warranty repairs 30,000

Bad debt expense 60,000

Ending balance in allowance for bad debts 40,000

Rent received in advance that will be recognized evenly over the next three years 300,000

Required -

1. How much is the accounting profit subject to tax?

A. 3,800,000 B. 4,000,000 C. 4,150,000 D. 4,300,000

2. What is the deferred tax liability at year-end?

A. 60,000 B. 75,000 C. 90,000 D. 105,000

3. What is the deferred tax asset at year-end?

A. 45,000 B. 60,000 C. 75,000 D. 105,000

4. What is the taxable income for the first year?

A. 3,800,000 B. 4,000,000 C. 4,150,000 D. 4,300,000

5. What is the total income tax expense for the first year?

A. 1,200,000 B. 1,245,000 C. 1,290,000 D. 1,335,000

6. What is the current tax liability at year-end?

A. 1,200,000 B. 1,245,000 C. 1,290,000 D. 1,335,000