Reference no: EM133092756

Question - The accounting records of Venus, Inc. show the following data for 20X1.

1. Equipment was acquired in early January for P300,000 straight-line depreciation over a 5-year life is used, with no residual value. For tax purposes, Venus used a 30% rate to calculate depreciation.

2. Interest revenue on government bonds totaled P4,000.

3. Product warranties were estimated to be P50,000 in 20X1. Actual repair and labor costs related to the warranties in 20X1 were P10,000. The remainder is estimated to be paid evenly in 20X2 and 20X3.

4. Sales on an accrual basis were P100,000. For tax purposes, P75,000 was recorded on the installment-sales method.

5. Fines incurred for pollution violations were P4,200.

6. Pretax financial income was P750,000. The tax rate is 30%.

Required -

1. Prepare a schedule (reconciliation) starting with pretax financial income in 20X1 and ending with taxable income in 20X1.

2. Prepare the journal entry in 20X1 to record income taxes payable, income tax expense, and deferred income taxes. Show supporting calculations.

3. Prepare the income tax section of Venus' income statement for 20X1, beginning with the line "Profit before tax."