problem 49
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Problem 49
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
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
Taxable Income, 2014 P
256,000.00
Regular Corporate Income Tax Rate x 40%
Current Tax Expense, 2014 P
102,400.00
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
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
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
Requirement 2
Prepare all the necessary journal entries for 2014 in Walsh Trading Books
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
Requirement 3
Prepare a partial income statement for Walsh Trading beginning with “income before income taxes” for the year ended December 31, 2014
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