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Free Chegg : Complex Company reported pretax accounting of

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Free Chegg : Complex Company reported pretax accounting of

Free Chegg Q&A #296 - Your Question

Complex Company reported pretax accounting of P12,800,000 for 2020 and P18,300,000 for 2021. The income tax rate is 30%.

On January 1, 2020, the entity had a deferred tax asset of P450,000 and no deferred tax liability.

The deferred tax asset was due to a provision of P500,000 recognized on December 31, 2019, settled in 2020 at which time it was tax-deductible.

The other reason for the deferred tax asset was the rent of P1,000,000 collected in 2019 but earned only in 2020.

Life insurance premiums of P200,000 were recognized each year on key officers for 2020 and 2021.

The entity paid for two-year casualty insurance for P6,000,000 on January 1, 2020. The entire premium is tax-deductible when paid.

The entity collected rent from leasing some of its equipment. The rent is recognized as revenue when earned but taxable when collected.

2020 2021
Rent collected     3,300,000     3,500,000

Rent earned 2,500,000 3,300,000

The entity had trading investments. All gains and losses are recognized for tax purposes when the investments are sold.

During 2020, the entity recognized P1,700,000 unrealized losses on trading investments that were sold in 2021.

1. Compute taxable income for 2020 and 2021.
2. Compute current tax expense and total tax expense for 2020 and 2021.
3. Compute deferred tax assets and deferred tax liability on December 31, 2020, and 2021.
4. Prepare journal entries for 2020 and 2021.

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Free Chegg : Complex Company reported pretax accounting of 

Free Chegg : Complex Company reported pretax accounting of 

Free Chegg : Complex Company reported pretax accounting of 

Free Chegg : Complex Company reported pretax accounting of

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