Reference no: EM133176025

Question - Bond Company started to manufacture in 2020 copy machines that are sold on the instalment basis. The entity recognized gross profit of P6,000,000 for financial reporting purposes, and when instalment payments are received for tax purposes.

In 2020, the entity recognized gross profit of P6,000,000 for financial reporting purposes and P1,500,000 for tax purposes.

The amounts of gross profit expected to be recognized for tax purposes in 2021 and 2022 are P2,500,000 and P2,000,000 respectively.

The entity guaranteed the copy machines for two years. Warranty costs are recognized on the accrual basis for financial accounting reporting purposes and when paid for tax purposes.

Waranty expense accrued in 2020 is P2,500,000 but only P500,000 of warranty cost is paid in 2020. It is expected that in 2021 and 2022, P1,000,000 and P1,000,000 respectively of warranty costs will be paid.

In addition during 2020, P500,000 interest, net of 20% final income taxes, was received and earned and P100,000 insurance premium on life insurance policy that covered the life of the president was paid. The entity was the beneficiary.

Pretax accounting income in 2020 was P2,000,000. Any operating loss will be carried to 2021. The tax rate is 30%.

During 2021, P250,000 interest, net of 20% final income taxes, was received and earned and P300,000 insurance premium on life insurance policy that covered the life of the president was paid. The entity was the beneficiary.

Pretax accounting income in 2020 was P2,500,000. The tax rate is 30%.

1. What is the income tax payable reported on December 31, 2020?

2. What is the net income reported on December 31, 2020?

3. What amount should be reported as deferred tax asset on December 31, 2020?

4. What amount should be reported as deferred tax liability on December 31, 2021?

5. What is the net income reported on December 31, 2021?