Problem Quiz - Income Taxes
Due Apr 13 at 3:30pm Points 14 Questions 14
Available until Apr 13 at 11:59pm Time Limit 30 Minutes
Instructions
This quiz was locked Apr 13 at 11:59pm.
Attempt History
Attempt Time Scor
...
Problem Quiz - Income Taxes
Due Apr 13 at 3:30pm Points 14 Questions 14
Available until Apr 13 at 11:59pm Time Limit 30 Minutes
Instructions
This quiz was locked Apr 13 at 11:59pm.
Attempt History
Attempt Time Score
LATEST Attempt 1 20 minutes 9 out of 14
Score for this quiz: 9 out of 14
Submitted Apr 13 at 3:29pm
This attempt took 20 minutes.
Compute for what is being asked in each problem. All answers should be in numeric format. For
example, 460,000 or 9,000. If your answer is negative, your answer must look like this, -460,000. Don't
forget to place comma. Lastly, round off final answers to whole number.
Question 1 1 / 1 pts
MM Company started to manufacture in 2020 copy machines that are sold
on installment basis. MM recognizes revenue when equipment is sold for
financial reporting purposes, and when installment payments are received
for tax purposes. In 2020, MM 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. MM
guarantees the copy machines for two years. Warranty costs are
recognized on the accrual basis for financial accounting purposes and
when paid for tax purposes. Warranty expenses 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 P1,000,00, respectively,of warranty costs will be paid. In addition during 2020, P500,000 interest
net of 20% final income tax, was received and earned, and P200,000
insurance premium on life insurance policies that covered the life of MM
Company’s president was paid. MM is the beneficiary for this policy. The
tax rate is 35%. The accounting profit in 2020 was P2,000,000. Assuming
any 2020 net loss will be carried over to 2021, how much is the deferred
tax asset to be recognized as of December 31, 2020?
Correct! Correct! 980,000
orrect orrect Answers Answers 980,000 (with margin: 0)
Question 2 0 / 1 pts
The following differences enter into the reconciliation of financial
income and taxable income of KK Company for the year ended
December 31, 2020, its first year of operations
Accounting profit
P4,500,000
Excess tax depreciation
3,000,000
Litigation accrual
450,000
Unearned rent income deferred on the book
but appropriately recognized in taxable income
250,000
Interest income from long-term certificate of deposit 100,000
Additional information:
A. Excess tax depreciation will reverse equally over a four year
period, 2021-2024.
B. It is estimated that the litigation liability will be paid in 2024.
C. Rent income will be recognized during the last year of the lease,
2024
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