SHM Corporation establishes a P90million liability at the end of 2019 for the estimated litigation settlement for manufacturing defects. All related costs will be paid and deducted on the tax return in 2020. Also at the end of 2019, the Company has P50million of temporary differences due to excess depreciation for tax purposes, P7million will reverse in 2020. The enacted tax rate for all years is 40% and the Company pays taxes of P64million on P160million of taxable income in 2019. SHM expects to have taxable income in 2020. Instructions: (a) Determine the deferred taxes to be reported at the end of 2019 (b) Indicate how the deferred taxes computed in (a) are to be reported in the balance sheet. (c) Assuming that the only deferred tax account at the beginning of 2012 was a deferred tax liability of P10,000,000, draft the income tax expense portion of the income statement for 2019 beginning with the line “Income before income taxes.
SHM Corporation establishes a P90million liability at the end of 2019 for the estimated litigation settlement for manufacturing defects. All related costs will be paid and deducted on the tax return in 2020. Also at the end of 2019, the Company has P50million of temporary differences due to excess
The enacted tax rate for all years is 40% and the Company pays taxes of P64million on P160million of taxable income in 2019. SHM expects to have taxable income in 2020.
Instructions:
(a) Determine the
(b) Indicate how the deferred taxes computed in (a) are to be reported in the
(c) Assuming that the only deferred tax account at the beginning of 2012 was a
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