Accounting For Income Tax

CHAPTER 19
ACCOUNTING FOR INCOME TAX
Problem 19-1
Hilton Company reported pretax financial income of P6, 200, 000 for the current year. Included
in other income was P500, 000 of interest revenue from the government bonds held by the
entity. The income statement included depreciation expense of P500, 000 for a machine with
cost of P3, 000, 000. The income tax return reported P600, 000 as depreciation on the machine.
The enacted tax rate is 30% for the current year and future years.
What is the current tax expense for the current year?

a. 1, 860, 000 c. 1, 770, 000
b. 1, 800, 000 d. 1, 830, 000
Problem 19-2
Tantrum Company began operation at the beginning of the current year. At the end of the first
year of operations, the entity reported P6, 000, 000 income before income tax in the income
statement but only P5, 100, 000 taxable income in the tax return. Analysis of the P900, 000
difference revealed that P500, 000 was a permanent difference and P400, 000 was a temporary
tax liability difference related to a current asset. The enacted tax rate for the current year and
future years is 30%
What is the total income tax expense to be reported in the income statement for the current
year?
a. 1, 800, 000 c. 1, 650, 000
b. 1, 530, 000 d. 1, 950, 000
Problem 19-3
In 2015, Tiger Company reported pretax financial income of P5, 000, 000. Included in the pretax
financial income are P900, 000 of nontaxable life insurance proceeds received as a result of the
death of an officer, P1, 200, 000 of estimated warranty expense accrued on December 31, 2015,
and P200, 000 of life insurance premiums or a policy for an officer. No income tax was
previously paid during the year and the income tax rate is 30%
What is the income tax payable on December 31, 2015?

a. 1, 500, 000 c. 1, 290, 000
b. 1, 230, 000 d. 1, 650, 000
Problem 19-4
Viking Company reported in the income statement for the year ended December 31, 2015
pretax income of P1, 000, 000.
Tax return Accounting record
Rent income 70, 000 120, 000
Depreciation 280, 000 220, 000
Premiums on officer’s life insurance 90, 000
Income tax rate 30%
What is the current provision for income tax for 2015?

a. 360, 000 c. 294, 000
b. 300, 000 d. 327, 000
Problem 19-5
Pine Company reported pretax financial income of P800, 000 for the year ended December 31,
2015. In the computation of income taxes the following data were considered:
Nontaxable gain 350, 000
Depreciation deducted for the tax purposes in excess of
Depreciation deducted for book purposes 50, 000
Estimated tax payment in 2015 70, 000
Enacted tax rate 30%
1. What amount should be reported as current tax liability in December 31, 2015?
a. 135, 000 c. 240, 000
b. 120, 000 d. 65, 000
2. What is the total income tax expense?
a. 120, 000 c. 240, 000
b. 135, 000 d. 85, 000
Problem 19-6
Huskie Company reported in the income statement for the current year pretax income of P400,
000. The following items are treated differently per tax return and per book:
Tax return Book
Royalty income 20, 000 40, 000
Depreciation expense 125, 000 100, 000
Payment of a penalty none 15, 000
Income tax rate 30%
1. What amount should be reported as current portion of income tax expense?

a. 111, 000 c. 138, 000
b. 106, 500 d. 114, 000
2. What is the total tax expense?
a. 120, 000 c. 115, 500
b. 124, 500 d. 117, 000
Problem 19-7
During the current year, Everlasting Company reported accounting income of P9, 000, 000
before income tax. The entity revealed the following information for the current year:
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 600, 000
Actual warranty payment 300, 000
Income from the installment sale reported for tax
purposes in excess of income recognized per book 200, 000
Income tax rate 30%
What is the current tax liability at year-end?

a. 2, 700, 000 c. 2, 490, 000
b. 2, 130, 000 d. 2, 130, 000
Problem 19-8
Canterbury Company made an accounting profit of P4, 000, 000 for the current year which
included the following items of income and expense:
Donation to political parties (nondeductible) 1, 000, 000

Depreciation-20% 1, 600, 000
Annual leave expense 700, 000
Rent revenue 1, 200, 000
Income tax rate 30%
For tax purposes the, depreciation rate is 25%, the annual leave paid is P800, 000 and the rent
received is P1, 000, 000. The entity followed the cash basis for tax purposes.
What is the current tax liability at year-end?
a. 1, 200, 000 c. 1, 368, 500

b. 1, 290, 000 d. 1, 150, 000
Problem 19-9
Aris Company computed a pretax accounting income P5, 000, 000 for the first year of
operations.
Nondeductible expenses 200, 000

Nontaxable revenue 500, 000
Gross income on installment sales reported in
Accounting income but on in taxable income 1, 000, 000
Provision for doubtful accounts 100, 000
Income tax rate 30%
What is the current tax expense?
a. 1, 140, 000 c. 1, 500, 000

b. 1, 410, 000 d. 1, 110, 000
Problem 19-10
Herbie Company had cumulative taxable temporary differences on December 31, 2015 and
December 31, 2014 of P1, 350, 000 and P960, 000, respectively. The tax rate for 2015 is 40%
while the tax rate for future years is 30%. Taxable income for 2015 is P2, 400, 000 and there are
no permanent differences.
What is the pretax financial income for 2015?
a. 3, 750, 000 c. 2, 010, 000

b. 2, 790, 000 d. 1, 050, 000
Problem 19-11
Dunn Company reported in the income statement for the current year P900, 000 income before
provision for income tax.
Rent received in advance 150, 000

Interest income on time deposit 200, 000
Depreciation deduction for income tax purposes
In excess of financial depreciation 100, 000
Income tax rate 30%
What is the current provision for income tax for the current year?
a. 270, 000 c. 210, 000
b. 225, 000 d. 255, 000
Problem 19-12
Cascade Company is determining the amount of the pretax accounting income for the current
year by making adjustment to taxable income tax return. The tax return showed taxable income
of P4, 000, 000 on which a liability of P1, 200, 000 has been recognized.
The entity provided the following items that may be required to determine pretax accounting
income from the amount of taxable income:
 Accelerated depreciation for income tax purposes was P500, 000. Straight line financial
depreciation on these assets is P400, 000.
 Goodwill impairment loss of P300, 000 was not included as a deduction in the tax return
but may be deducted in the income statement.
 Interest income on treasury bills was not included in the tax return. During the year,
P600, 000 was received on theses investment.
What is the pretax accounting income for the current year?
a. 4, 100, 000 c. 4, 300, 000
b. 4, 200, 000 d. 4, 400, 000
Problem 19-13
On January 1, 2015, Midland Company purchased a machine for P1, 400, 000. This machine has
a 5-year useful life, a residual value of P200, 000 and is depreciated using the straight line
method for financial statement purposes. For tax purposes, depreciation was P500, 000 for
2015 and P400, 000 for 2016. The 2016 income before tax and depreciation was P2, 000, 000
and the rate was 30%. The entity made estimated tax payment of P200, 000 during 2016.
1. What is the income tax payable on December31, 2016

a. 480, 000 c. 450, 000
b. 280, 000 d. 250, 000
2. What is the total income tax expense that is reported in the 2016 income statement?
a. 480, 000 c. 528, 000
b. 450, 000 d. 540, 000
Problem 19-14
Punk Company reported the following partial income statement after the first year of
operations:
Income before income tax 3, 750, 000

Income tax expense
Current 1, 035, 000
Deferred 90, 000 1, 125, 000
Net income 2, 625, 000
The entity used the straight line method of depreciation for financial reporting purposes and
accelerated depreciation for tax purposes. The amount charged to depreciation expense per
book was P1, 500, 000. No other differences existed between book income and taxable income
except for the amount of depreciation. The income tax rate is 30%.
What amount was deducted for depreciation in the tax return for the current year?
a. 1, 200, 000 c. 1, 500, 000
b. 1, 425, 000 d. 1, 800, 000
Problem 19-15
Jasco Company is in the first year of operations. The entity reported pretax accounting income
of P4, 000, 000 and provided the following items.
Premium on life insurance of key officer 100, 000

Depreciation on tax return in excess of book depreciation 120, 000
Interest on municipal bonds 53, 000
Warranty expense 40, 000
Actual warranty repairs 33, 000
Bad debt expense 14, 000
Beginning balance in allowance for uncollectible accounts 0
Ending balance in allowance for uncollectible accounts 8, 000
Rent received in advance that will be recognized evenly
Over the next three years 240, 000
What is the taxable income for the first year?

a. 4, 182, 000 c. 4, 047, 000
b. 4, 102, 000 d. 4, 082, 000

Accounting For Income Tax

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CHAPTER 19

ACCOUNTING FOR INCOME TAX

What is the current tax expense for the current year?

What is the income tax payable on December 31, 2015?

What is the current provision for income tax for 2015?

1. What amount should be reported as current portion of income tax expense?

Interest income on government bonds 700, 000

What is the current tax liability at year-end?

Donation to political parties (nondeductible) 1, 000, 000

What is the current tax liability at year-end?

a. 1, 200, 000 c. 1, 368, 500

Nondeductible expenses 200, 000

What is the current tax expense?

a. 1, 140, 000 c. 1, 500, 000

What is the pretax financial income for 2015?

a. 3, 750, 000 c. 2, 010, 000

Rent received in advance 150, 000

1. What is the income tax payable on December31, 2016

Income before income tax 3, 750, 000

Premium on life insurance of key officer 100, 000

What is the taxable income for the first year?

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