. Matthew Company started to manufacture in 2012 copying machines that are sold on the installment basis. Matthew recognizes revenue when equipment is sold for financial reporting purposes and when installment payments are received for tax purposes. In 2012, Matthew recognized gross profit of P10,000,000 for financial reporting purposes and P6,000,00 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2013 and 2014 is P2,000,000 each. Matthew guarantees the copying machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expense accrued in 2012 is P2,800,000 but only P1,000,000 of the warranty cost was paid in 2012. It is expected that in 2013 and 2014, P1,100,000 and P700,000, respectively, of warranty costs will be paid. In addition, during 2012, P500,000 interest, net of 20% final income tax, was received and earned, and P200,000 insurance premium on life insurance policy that covered the life of Matthew Company’s president was paid. Matthew is the beneficiary of this policy. The tax rate has been 30%; accounting income in 2012 was P5,000,000.Assuming Matthew has not made any tax payments in 2012 yet, how much is its income tax payable? * a. P750,000 b. P840,000 c. P930,000 d. P1,410,000
29. Matthew Company started to manufacture in 2012 copying machines that are sold on the installment basis. Matthew recognizes revenue when equipment is sold for financial reporting purposes and when installment payments are received for tax purposes. In 2012, Matthew recognized gross profit of P10,000,000 for financial reporting purposes and P6,000,00 for tax purposes. The amounts of gross profit expected to be recognized for tax purposes in 2013 and 2014 is P2,000,000 each. Matthew guarantees the copying machines for two years. Warranty costs are recognized on the accrual basis for financial accounting purposes and when paid for tax purposes. Warranty expense accrued in 2012 is P2,800,000 but only P1,000,000 of the warranty cost was paid in 2012. It is expected that in 2013 and 2014, P1,100,000 and P700,000, respectively, of warranty costs will be paid. In addition, during 2012, P500,000 interest, net of 20% final income tax, was received and earned, and P200,000 insurance premium on life insurance policy that covered the life of Matthew Company’s president was paid. Matthew is the beneficiary of this policy. The tax rate has been 30%; accounting income in 2012 was P5,000,000.Assuming Matthew has not made any tax payments in 2012 yet, how much is its income tax payable? *
a. P750,000
b. P840,000
c. P930,000
d. P1,410,000
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