Sie sind auf Seite 1von 3

ACCOUNTING FOR INCOME TAX

ABC Company has the following data for the three succeeding taxable years:
Gross income
Net income (loss)
Permanent difference
Interest income subject to 20% final tax
Dividends received from Jollibee Foods Corporation
Insurance premium paid for the CEO (beneficiary is the company)
Donations paid (allowed, P1500)
Temporary difference
Interest earned
Interest collected
Rent paid
Rent expense
Depreciation expense, acctg.
Depreciation expense, tax
Tax rate
DTA, beg.
DTL, beg.

2014
100,000
20,000

2015
110,000
10,000

400
1,000
200
2,000

200
500
200
1,000

2,000
4,000
50,000
30,000
10,000
20,000
30%
1,500
960

2,000
1,000
10,000
30,000
10,000
12,000
30%
?
?

20,000

10,000

* No other temporary differences


* Beginning balance of DTA as of 2014 is warranty liability actually paid on 2015.
* Beginning balance of DTL as of 2014 is expense paid in advance which is incurred in 2016.
* On December 31, 2014, Revaluation surplus amounted to 10,000.
*Cost of equipment purchased on January 1, 2014 is 50,000.
REQUIRED:
1.) Compute the taxable income for 2014 and 2015.
2.) Compute the income tax expense for 2014 and 2015.
3.) Compute the net income after tax to appear in the income statement for 2014 and 2015.
4.) Compute the DTA, end as of December 31, 2014 and 2015.
5.) Compute the DTL, end as of December 31, 2014 and 2015.
6.) Prepare the journal entries for 2014 and 2015.
SOLUTION:
Net income before tax
Permanent differences
Interest income subject to 20% final tax
Dividends received from Jollibee Foods Corporation
Insurance premium paid for the CEO (beneficiary is the company)
Donations paid (allowed, P1500)
Accounting income subject to tax
Temporary differences: FTA/Reversal of FDA (FDA/Reversal of FTA)
Prepaid expense
Warranty expense
Interest income
Rent expense
Depreciation expense
NOLCO
Taxable income

(400)
(1,000)
200
500
19,300

2,000
(20,000)
(10,000)
(8,700)

(200)
(500)
200
9,500

(5,000)
(1,000)
20,000
(2,000)
(8,700)
12,800

Current Income Tax


Less: Deferred tax asset Add: reversal of DTA
Warranty expense
Interest income
NOLCO
Add: Deferred tax liability Less: reversal of DTL
Rent expense
Depreciation expense
Income tax expense

2014

2015
3,840

(600.00)
(2,610.00)

1,500.00
300.00
2,610.00

6,000.00
3,000.00
5,790

(6,000.00)
600.00
2,850
-

INCOME STATEMENT PRESENTATION


Income before tax expense
Current income tax expense
Deferred income tax expense (benefit)
Income tax expense
Income after tax
*
JOURNAL ENTRY
Account Title
JE No. 1 Income tax expense
Income tax payable
Current income tax

20,000
5,790.00
5,790.00
14,210

10,000
3,840.00
(990.00)
2,850.00
7,150

2014
Debit

2015
Credit

Credit

3,840.00

9,000.00

JE No. 3 Revaluation surplus


Deferred tax liability
Increase in FV of equipment

3,000.00

3,840.00

9,000.00

3,000.00

JE No. 4 Deferred tax liability


Income tax expense
Reversal of DTL

JE No. 6 Income tax expense


Deferred tax asset
Reversal of DTA

Debit

Not applicable

JE No. 2 Income tax expense


Deferred tax liability
Increase in DTL

JE No. 5 Deferred tax asset


Income tax expense
Increase in DTA

5,400.00
5,400.00

3,210.00
3,210.00

4,410.00
4,410.00

DEFERRED TAX ASSET -2014


Warranty
Liability

DEFERRED TAX ASSET - 2014


January 1, 2014
Change in 2014
December 31, 2014

1,500

BALANCE SHEET METHOD


Carrying amount, 12/31/2014
Tax base, 12/31/2014
Future deductible amount
Tax rate
Deferred tax asset

1-Jan-14
JE No. 5
31-Dec-14

Unearned
Interest
Income

DEFERRED TAX ASSET - 2015

NOLCO

Total

1,500

600
600

2,610
2,610

1,500
3,210
4,710

5,000
5,000
30%
1,500

2,000
2,000
30%
600

8,700
8,700
30%
2,610

15,700
15,700
30%
4,710

DEFERRED TAX ASSET - 2015


January 1, 2015
Change in 2015
December 31, 2015
BALANCE SHEET METHOD
Carrying amount, 12/31/2015
Tax base, 12/31/2015
Future deductible amount
Tax rate
Deferred tax asset

DEFERRED TAX ASSET


1,500
3,210
4,710

1-Jan-15
31-Dec-15

DEFERRED TAX LIABILITY - 2014


Rent
Payable
January 1, 2014
Revaluation
Change in 2014
December 31, 2014

BALANCE SHEET METHOD


Carrying amount, 12/31/2014
Tax base, 12/31/2014
Future taxable amount
Tax rate
Deferred tax liability

Equipment

6,000
6,000
Prepaid
Rent
20,000
20,000
30%
6,000

Equipment
50,000
30,000
20,000
30%
6,000

DEFERRED TAX LIABILITY


960
3,000
9,000
12,960

Unearned
Interest
Income

NOLCO

Total

1,500
(1,500)
-

600
(300)
300

2,610
(2,610)
-

4,710
(4,410)
300

30%
-

1,000
1,000
30%
300

30%
-

1,000
1,000
30%
300

DEFERRED TAX ASSET


4,710
4,410
300

JE No. 6

DEFERRED TAX LIABILITY - 2015


Prepaid
Expense
960

3,000
3,000
6,000

Warranty
Liability

960
Prepaid
Expense
3,200
3,200
30%
960

1-Jan-14
JE No. 3
JE No. 2
31-Dec-14

Rent
Payable Equipment

Total
960
3,000
9,000
12,960

Total
73,200
30,000.00
43,200
30%
12,960

January 1, 2015
Change in 2015
December 31, 2015

BALANCE SHEET METHOD


Carrying amount, 12/31/2015
Tax base, 12/31/2015
Future taxable amount
Tax rate
Deferred tax liability

6,000
(6,000)
-

6,000
600
6,600

Prepaid
Rent Equipment
30%
-

40,000
18,000
22,000
30%
6,600

Prepaid
Expense
960
960

Prepaid
Expense
3,200

Total
12,960
(5,400)
7,560

Total

43,200
18,000.00
3,200
25,200
30%
30%
960
7,560

DEFERRED TAX LIABILITY


JE No. 4 5,400 12,960
1-Jan-15
7,560
31-Dec-15