Reference no: EM132556042

In 2020, Velen Corp. reported a gross profit on installment sale of P 1,500,000. This temporary difference is expected to be collected in full during 2021. No other differences between accounting income and taxable income were reported in 2020. The income tax rate is 30%.

                                                        2020                     2021

Accounting income                  6,000,000           5,000,000

Taxable income                         4,500,000           6,500,000

Temporary difference                   1,500,000               (1,500,000)

Requirements:

Question 1. What amount of income tax expense will be recorded in 2020?

Question 2. What amount of deferred tax liability will be presented in the 2020 statement of financial position?

Question 3. Provide the necessary journal entries in 2020 & 2021 to record income taxes, assuming payment of tax due were made for both 2020 and 2021.