Answer to Question #163937 in Accounting for Willy

Question

Dunn Company reported P900,000 income before provisions for income tax during the current year.

To compute the provision for income tax, the following data are provided:

Rent received in advance-------------------------------------------------------150,000

Interest income on time deposit (permanent difference) ---------------200,000

Depreciation deducted for income tax purposes in excess of depreciation for financial statement purposes ---------------------------------------------------------------------------100,000

Estimated tax payment in the current year --------------------------------125,000

Income tax rate-------------------------------------------------------------------------30%

What amount of income tax payable should be reported at year-end?

a. 125,000

b. 100,000

c. 210,000

d. 225,000

Answer 1

Answer

Calculation of taxable income

Taxable income = Reported Income + Rent received in advance - Interest Income - Excess depreciation

Taxable income = 900000 + 150000 - 200000 - 100000

Taxable income = 750,000             

Calculation of tax and tax payable

Tax on taxable income = Taxable income * Tax rate

Tax on taxable income =750,000 * 30%

Tax on taxable income = 225000

 

Tax payable reported at the end of year = 225,000