Prepare the journal entry to record income taxes

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Reference no: EM132803916

AUDIT OF LIABILITIES

Canon Corporation reported accounting income before taxes as follows: 2018, P150, 000; 2019, P176, 000. Taxable income for each year would have been the same as pretax accounting income except for the tax effects, arising for the first time in 2018, of P600 per month rent revenue collected in advance on October 1, 2018, for the six months ending March 31, 2019. Rent revenue is taxable in the year collected. The tax rate for 2018 and 2019 is 30%, and the year-end for both accounting and tax purposes is December 31. The rent revenue collected in advance is the only difference, and it is not repeated in October 2019.

Requirements:

Problem a. Is the difference a temporary or permanent difference? Explain.

Problem b. Calculate income tax payable for 2018 and 2019 and prepare the journal entry to record income taxes for 2018 and 2019.

Problem c. What amount of deferred income tax asset or liability would be reported on the 2016 and 2017 balance sheets?

Reference no: EM132803916

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