Stephens Company has a deductible temporary difference of P2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has P1,800,000 of income taxes payable. At the end of the first year, after a careful review of all available evidence, Stephens determines that it is probable that it will not realize P200,000 of this deferred tax asset. At the end of the second year of operations, Stephens Company determines that it expects to realize P1,850,000 of this deferred tax assets. On Stephens Company’s income statement for the second year, what amount of income tax expense will it report related to the temporary difference, and is the amount a debit or credit? P40,000 credit. P40,000 debit. P20,000 debit. P20,000 credit.
Stephens Company has a deductible temporary difference of P2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has P1,800,000 of income taxes payable. At the end of the first year, after a careful review of all available evidence, Stephens determines that it is probable that it will not realize P200,000 of this deferred tax asset. At the end of the second year of operations, Stephens Company determines that it expects to realize P1,850,000 of this deferred tax assets. On Stephens Company’s income statement for the second year, what amount of income tax expense will it report related to the temporary difference, and is the amount a debit or credit? P40,000 credit. P40,000 debit. P20,000 debit. P20,000 credit.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter3: Taxes On The Financial Statements
Section: Chapter Questions
Problem 2P
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Stephens Company has a deductible temporary difference of P2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has P1,800,000 of income taxes payable. At the end of the first year, after a careful review of all available evidence, Stephens determines that it is probable that it will not realize P200,000 of this deferred tax asset. At the end of the second year of operations, Stephens Company determines that it expects to realize P1,850,000 of this deferred tax assets . On Stephens Company’s income statement for the second year, what amount of income tax expense will it report related to the temporary difference, and is the amount a debit or credit?
P40,000 credit.
P40,000 debit.
P20,000 debit.
P20,000 credit.
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