15. ABC began operating on January 1, 2020. At the end of the first year of operation, ABC reported P7,000,000 income before income tax on its statement of financial performance and P2,500,000 taxable income on its tax return. Analysis of the P4,500,000 revealed that P3,500,000 was a difference without future tax consequence, and the other P1,000,000 was a temporary difference related to prepaid rent which is expected to reverse in 2022. At the end of 2021, the accumulated temporary tax liability difference related to future years is P1, 500,000. The P500,000 increase is due to an accrued income taxable only when actual collection is made, which is expected on the year 2022. The current and enacted future tax rate is 30%. Assume that the income before tax in 2021 and 2022 are P6,500,000 and P7,200,000, respectively. There is no permanent difference during these years. Following the rules applicable in accounting for deferred taxes, compute the deferred tax liability as of the end of 2020.

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 9MC: Brooks Company reported a prior period adjustment of 512,000 in pretax financial "income" and...
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15. ABC began operating on January 1, 2020. At the end of the first year of operation, ABC reported P7,000,000 income before income tax on its statement of financial performance and P2,500,000 taxable income on its tax return. Analysis of the P4,500,000 revealed that P3,500,000 was a difference without future tax consequence, and the other P1,000,000 was a temporary difference related to prepaid rent which is expected to reverse in 2022. At the end of 2021, the accumulated temporary tax liability difference related to future years is P1, 500,000. The P500,000 increase is due to an accrued income taxable only when actual collection is made, which is expected on the year 2022. The current and enacted future tax rate is 30%. Assume that the income before tax in 2021 and 2022 are P6,500,000 and P7,200,000, respectively. There is no permanent difference during these years. Following the rules applicable in accounting for deferred taxes, compute the deferred tax liability as of the end of 2020. 

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