Download - Problem 49
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Problem 49
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Requirement 1
Determine the taxable income, current tax expense, deferred income tax asset/liability, deferred tax expense/benefit of Walsh Trading as of December 31, 2014
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Accounting Income P 220,000.00
Permanent Differences:
Nondeductible Expenses P 40,000.00
Nontaxable Revenues (14,000.00)
26,000.00
Accounting Income Subject to Tax P 246,000.00
Temporary Differences:
Unrealized ForEx Gains on Loans Payable (Future Taxable) P
(70,000.00)
Accrued Warranty Expenses (Future Deductible) 80,000.00
10,000.00
Taxable Income, 2014 P 256,000.00
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Taxable Income, 2014 P
256,000.00
Regular Corporate Income Tax Rate x 40%
Current Tax Expense, 2014 P
102,400.00
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Deferred Tax Liability / Deferred Tax Expense
Unrealized ForEx Gains on Loans Payable (Future Taxable)
2015 (P 14,000 x 35%) P 4,900.00
2016 (P 32,000 x 32%) 10,240.00
2017 (P 24,000 x 30%) 7,200.00
Deferred Tax Liability, Dec. 31, 2014 / Deferred Tax Expense, 2014 P
22,340.00
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Deferred Tax Asset / Deferred Tax Benefit
Accrued Warranty Expense (Future Deductible)
2015 (P 14,000 x 35%) P
4,900.00
2016 (P 36,000 x 32%) 11,520.00
2017 (P 18,000 x 30%) 5,400.00
2018 (P 12,000 x 34%) 4,080.00
P 25,900.00
Deferred Tax Asset from Excess (Future Deductible)
80,000.00
Deferred Tax Asset, Dec. 31, 2014 / Deferred Tax Benefit, 2014
P 105,900.00
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Treatment of Excess of MCIT over RCIT
Minimum Corporate Income Tax, 2014 (P10,000,000 x 2%) P 200,000.00
Regular Corporate Income Tax, 2014 (see Current Tax Expense, 2014)
(102,400.00)
Excess of MCIT over RCIT, 2014 P 97,600.00
In 2015, no credit is to be applied since it is expected that MCIT will still exceed RCIT. P 0
In 2016, a credit will be applied to RCIT for the period:
80,000.00
Deferred Tax Asset from Excess P 80,000.00
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Requirement 2
Prepare all the necessary journal entries for 2014 in Walsh Trading Books
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2014 Dec. 31 Current Tax Expense
200,000
Current Tax Payable 200,000
Current tax expense for 2014 at MCIT. Deferred Tax Asset 83,560 Income Tax Benefit
83,560
Deferred Tax Liability P (22,340)Deferred Tax Asset 25,900MCIT 80,000
Net Deferred Tax Asset P 83,560
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Requirement 3
Prepare a partial income statement for Walsh Trading beginning with “income before income taxes” for the year ended December 31, 2014
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Walsh TradingPartial Income Statement
For the Year Ended December 31, 2014
Income before Income Taxes P 220,000
Income Tax Expense:
Current Tax Expense P 200,000
Deferred Tax Expense 22,340
Deferred Tax Benefit (105,900) (116,440)
Net Income After Tax P 103,560