1.

In the most recent issuance of the tax authorities, clubs which are organized and operated
exclusively for pleasure, recreation, and other non-profit purposes are
a) Subject to both income tax and VAT
b) Subject to income tax but not VAT
c) Subject to VAT but not income tax
d) Exempt from income tax and VAT

2. Mark-to-market valuation loss from financial assets (i.e., foreign bonds and quoted equity
securities) designated at fair value through profit or loss (FVPL) amounting to P 143,000,000 was
considered by FIVE, Inc. as a future deductible amount resulting to a DTA of P 42,900,000.
However, you noted that P 41,000,000 of the total amount of said loss pertains to various bond
investments with maturity of more than five (5) years and any gains realized on subsequent sale,
exchange or retirement of the related indebtedness are excluded from taxable income pursuant
to Section 32 (B) (7) (g) of the tax code, as amended. The amount of total decrease in deferred
tax expense amounts to?

3. The Khaki Company sells merchandise for P8,000 to a customer on 31 December 20x7. The
terms of the sale agreement state that payment is due in one year's time. Khaki has an imputed
rate of interest of 9%. Under IAS18 Revenue, how much revenue should Khaki recognize in profit
or loss for the year ended 31 December 20x7?

4. The ledger of ABC Co. as of December 31, 20x1 includes the following:

Liabilities
Bank overdraft 5,000
Trade accounts payable (net of P5,000 debit balance in accounts) 20,000
Notes payable (due in 20 semi-annual payments of P2,000) 40,000
Interest payable 15,000
Bonds payable (due on March 31, 20x2) 35,000
Discount on bonds payable (15,000)
Dividends payable 5,000
Share dividends payable 6,000
Deferred tax liability (expected to reverse in 20x2) 18,000
Income tax payable 22,000
Contingent liability 50,000
Reserve for contingencies 14,000
Totals 215,000

Requirement: Compute for total current liabilities.

5. ABC Co. follows a fiscal year that ends in June 30. On January 1, 20x1, there has been a change
in the tax rate in the jurisdiction where ABC Co. operates. The tax rate prior to January 1, 20x1 is
30% while the newly enacted tax rate that will apply from January 1, 20x1 onwards is 35%. ABC
reported pretax profit of P320,000 for the fiscal year ended June 30, 20x1. The only temporary
difference pertains to a P4,000, one-year fire insurance premium taken by ABC on its building on
 January 1, 20x1. The premium paid is tax deductible in full upon payment. There were no
temporary differences as of July 1, 20x0. There were also no payments for income tax during the
year.

Requirement: Compute for the income tax expense for the fiscal year ended June 30, 20x1.

6. On January 1, 2009, ACCELERATOR Company purchased a P600,000 machine, with a five-year

useful life and no residual value. The machine was depreciated by an accelerated method for book
and tax purposes. The carrying amount was P240,000 on December 31, 2010. On January 1, 2011,
Marilyn changed to the straight-line method for financial reporting purposes. The income tax rate
is 30%. On January 1, 2011, what amount should be reported as deferred tax liability as a result
of the change?

7. The following relates to the Temporary differences for IBA Company.

Deferred tax Asset, beg 150,000

Deferred tax Liability, beg 90,000
The following has also occurred during the year:
 Temporary difference of 200,000 relating to Future taxable item has occurred during the year.
 Temporary difference of 480,000 relating to Future deductible item has occurred during the
year.
 40,000 of the temporary difference relating to the beginning balance of Deferred Tax Asset have
reversed during the year.
 120,000 of the temporary difference relating to the beginning balance of deferred liability have
reversed during the year.
The income tax payable end is 700,000. The income tax rate is 30%
What is the net deferred tax expense during the year?

8. Nadja, Inc. began operating on January 1, 2012. At the end of the first year of operations, Nadja
reported P7,500,000 income before income taxes on its income statement but only P700,000
taxable income on its tax return. Analysis of the P6,800,000 difference revealed that P6,200,000
was a permanent difference and P600,000 was a temporary difference related to a current asset.
At the end of 2013, the accumulated temporary tax liability difference related to future years us
P1,100,000. The enacted tax rate is 30% for 2012 and 2013. The journal entry to adjust the
deferred tax liability at the end of 2013 should include a
a) Debit to Deferred tax liability of P150,000
b) Credit to Deferred tax liability of P150,000
c) Debit to Deferred tax asset of P150,000
d) Credit to Deferred tax liability of P330,000

9. For the year ended December 31, 2011, Everlasting Company reported accounting income of
P9,000,000 before income tax. Selected information for 2011 is available as follows:
 Interest income on government bonds 700,000
 Depreciation claimed on tax return in excess of depreciation per book 1,300,000
 Warranty expense on the accrual basis 400,000
 Actual warranty payment 300,000
 Income from installment sale reported for tax purposes in excess
of income recognized per book 50,000
What is the current tax liability on December 31, 2011?

10. Below are some of the account balances taken from Rosalyn Company’s Comparative financial
statements for 2006 and 2005:

December 31
2006 2005
Assets
Installment accounts receivable 800,000 600,000
Building – net of accumulated depreciation 700,000 800,000

Liabilities
Estimated Warranties Obligation 510,000 400,000
Additional information:
 Rosalyn Company recognizes installment sales in the period the goods are sold. For tax purposes,
revenues are taxed upon collection. Total collections in 2006 from installment sales were P750,000
 Rosalyn Company uses the straight-line method of depreciation for its building, which was acquired
on January 1, 2004, with an estimated life of 10 years, with no salvage value. For tax purposes,
double-declining balance is being employed
 Rosalyn offers a 3-year warranty against defects on it goods. Warranty expense is recognized in the
period the products are sold. For tax purposes, warranty expense is recognized when warranty costs
are paid. Warranties paid in 2006 totaled P500,000.
 Rosalyn Company reported income before taxes of P3,000,000 for 2006. Tax rate was 35% in the
current and future years.

The amount of deferred tax liability reported at December 31, 2005 is