Ex and Why Company commenced operations on January 1, 2019. It purchased a machinefor P200,000. The machine is being depreciated on a straight line basis over 5-year life, forincome tax purposes under double declining balance method. The company capitalizesproduct development expenditure in the amount of P120,000 in accordance with PAS 38., forincome tax purposes, such expenditure is claimed in the year it is incurred. For the year endedDecember 31, 2019, the company made a profit before tax of P500,000. This profit was afterdeducting general allowance for bad debts of P50,000 and provision for warranties ofP80,000. At year end, the balance of the gross trade receivable account was P300,000. Forincome 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 in2019?

Particulars Amount Profit as per books P500,000 (+) allowance for Bad debts P50000 (+)…

Answered: y commenced oper achine is being depi s…

Business

Accounting

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

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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Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

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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?

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