Prepare the journal entry to adjust deferred tax liability

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Boomerang, Inc started his operations on January 1, 2018. At the end of the first year of operations, the company reported P7, 500,000 income before income taxes on its statement but only P700, 000 taxable income on its tax return. Analysis of the P6, 800,000 difference revealed that P6, 200,000 was a temporary difference and P600, 000 was a permanent difference related to a current asset. At the end of 2019, the accumulated temporary tax liability difference related to future years is P1, 100,000. The enacted tax rate is 30% for 2018 and 2019.

Requirements:

Problem a. Prepare the journal entry to adjust the deferred tax liability at the end of 2019.

Problem b. Assume that at the end of 2019, the accumulated temporary tax liability difference related to future years is P550, 000. Prepare the journal entry to adjust the deferred tax liability at the end of 2019.

Reference no: EM132803925

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