Reference no: EM132557638

On December 31, 2020, the reported pretax financial income of Novigrad Company is P2,000,000 and current income tax rate is 35%. Assuming the following differences between financial income and taxable income for the year.

a. Gross profit of installment sales, collections will start in 2021, P350,000.

b. Excess of tax depreciation over book depreciation, P60,000.

c. Unearned rent for 2021 collected in 2020, P70,000.

d. Excess of warranty expense over actual expenditures, P45,000.

e. Excess of estimated uncollectible accounts for financial reporting over accounts actually written off for tax reporting, P24,000.

f. Premiums paid on life insurance policy of officers, P150,000. Beneficiary named in the policy is Novigrad Company.

g. Dividend income received from investee. P80,000.

h. Fines paid for late payment of taxes, P50,000.

Requirements:

Question 1. Classify the items A - H as:

• temporary difference - taxable

• temporary difference - deductible

• permanent difference

Question 2. What amount of taxable income will be reported in the 2020 income tax returns?

Question 3. What amount of income tax expense will be recorded in 2020?

Question 4. What amount of current tax payable / tax due will we pay to the BIR?

Question 5. What amount of deferred tax liability will be recorded in 2020?

Question 6. What amount of deferred tax asset will be recorded in 2020?

Question 7. Provide the journal entries related to income taxes for 2020 assuming the amount of tax due has been paid.