Reference no: EM132842411
Question - On December 31, 2018, the accounts of Hades Company have the same basis for accounting and tax purposes, except the following:
|
|
Carrying amount
|
Tax base
|
|
Computer software cost
|
8,000,000
|
0
|
|
Equipment
|
24,000,000
|
30,000,000
|
|
Accrued liability - health care
|
4,000,000
|
0
|
In January 2018, the company incurred cost of P12,000,000 in relation to the development of a computer software product. The software cost was appropriately capitalized and amortized over three years for accounting purposes using straight line. However, the total amount was expensed in 2018 for tax purposes.
The equipment was acquired on January 1, 2018 for P40,000,000. The economic life is four years without residual value. The equipment is depreciated using the sum of years' digits method for accounting purposes and straight line for tax purposes.
In January 2018, the company entered into an agreement with the employees to provide health care benefits. The cost of such plan for 2018 was P4,000,000. This amount was accrued as expense in 2018 for accounting purposes. However, health care benefits are deductible for tax purposes only when actually paid.
The pre-tax accounting income for 2018 is P26,000,000. The tax rate is 30% and there are no deferred taxes on January 1, 2018.
Required -
1. What is the current tax expense for 2018?
2. What is the deferred tax liability on December 31, 2018?
3. What is the deferred tax asset on December 31, 2018?
4. What is the deferred tax expense or benefit for 2018?
5. What is the total tax expense for 2018?