DD Co. established a P90 million liability at the end of 2020 for the estimated litigation settlement for manufacturing defects. All related costs will be paid and deducted on the tax return in 2021. Also at the end of 2020, the company has P50 million of temporary differences due to excess depreciation for tax purposes, P7 million of which will reverse in 2021. The enacted tax rate for all years is 40%, and the company pays taxes of P64 million on P160 million of taxable income in 2020. DD expects to have taxable income in 2021. Determine the deferred tax liability to be reported at the end of 2021.

DD Co. established a P90 million liability at the end of 2020 for the estimated litigation settlement for manufacturing defects. All related costs will be paid and deducted on the tax return in 2021. Also at the end of 2020, the company has P50 million of temporary differences due to excess depreciation for tax purposes, P7 million of which will reverse in 2021. The enacted tax rate for all years is 40%, and the company pays taxes of P64 million on P160 million of taxable income in 2020. DD expects to have taxable income in 2021. Determine the deferred tax liability to be reported at the end of 2021.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter26: Tax Practice And Ethics

Section: Chapter Questions

Problem 32P

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Similar questions

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