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y commenced oper achine is being depi s under double dec expenditure in the = such expenditure is the company made

y commenced oper achine is being depi s under double dec expenditure in the = such expenditure is the company made

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ex and Why Company commenced operations on January 1, 2019. It purchased a machine for P200,000. The machine is being depreciated on a straight line basis over 5-year life, for income tax purposes under double declining balance method. The company capitalizes product development expenditure in the amount of P120,000 in accordance with PAS 38., for income tax purposes, such expenditure is claimed in the year it is incurred. For the year ended December 31, 2019, the company made a profit before tax of P500,000. This profit was after deducting general allowance for bad debts of P50,000 and provision for warranties of P80,000. At year end, the balance of the gross trade receivable account was P300,000. For income tax purposes tax rate is at 32% a. What amount of deferred tax asset should the company have recognized in 2019? b. What amount of deferred liability asset should the company have recognized in 2019?
Transcribed Image Text:Ex and Why Company commenced operations on January 1, 2019. It purchased a machine for P200,000. The machine is being depreciated on a straight line basis over 5-year life, for income tax purposes under double declining balance method. The company capitalizes product development expenditure in the amount of P120,000 in accordance with PAS 38., for income tax purposes, such expenditure is claimed in the year it is incurred. For the year ended December 31, 2019, the company made a profit before tax of P500,000. This profit was after deducting general allowance for bad debts of P50,000 and provision for warranties of P80,000. At year end, the balance of the gross trade receivable account was P300,000. For income tax purposes tax rate is at 32% a. What amount of deferred tax asset should the company have recognized in 2019? b. What amount of deferred liability asset should the company have recognized in 2019?
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