Haba Co. is a manufacturing company who wishes to calculate its taxable profit or loss for...

     

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Haba Co. is a manufacturing company who wishes to calculate its taxable profit or loss for the year ended 31 December 2021. There are the statement of profit or loss and other comprehensive income, the statement of financial position and the notes below. Tax rate for 2021 is 30%, but the new tax rate of 32% for the year 2022 and beyond has already been enacted before the year end. Following are the financial statements for the period ended 31 December 2021. Statement of Financial Position as of 31 December 2021 Current Assets: Cash and cash equivalents Trade receivables Trading investments Inventories P 135,000 469,500 156,000 228,000 P 988,500 Noncurrent Assets: Property, plant and equipment Product development costs Investment in subsidiary Iksi TOTAL ASSETS Current Liabilities: Trade payables 900,000 45,000 330,000 1,275,000 P2,263,500 Health care benefits for employees P 573,000 52,500 P 625,500 Noncurrent Liabilities: Deferred income-government grants Liability for product warranty costs 30,000 12,000 Deferred tax liability (from 2020) 16,621 58,621 Equity: Share capital Accumulated profits Revaluation surplus TOTAL EQUITY & LIABILITIES 900,000 613,379 66,000 1,579,379 P2,263,500 Statement of Comprehensive Income for the year ended 31 December Revenue Less: Cost of sales Gross profit Less: Operating costs Profit from operations Less: Finance costs Profit before taxation 2021 (incomplete) P3,603,000 2,880,000 723,000 576,000 147,000 19,500 P 127,500 Additional information: 1) Depreciation expense for the year 2021 allowable in line with tax legislation is P154,500. Accounting depreciation included in operating costs is P127,500. Cost of PPE is P1,200,000 and Haba deducted expenses of P312,000 in its tax returns prior the year 2021. Moreover, as of 31 December 2021, Haba for the first time revalued its property, plant and equipment to market value of P900,000 (revaluation surplus = P66,000). 2) In 2018, Haba incurred product development costs of P75,000. These costs were recognized as an asset and amortized over period of 10 years. For tax purposes, Haba deducted full product development costs in 2018. 3) Trading investments were acquired in 2020 with cost of P172,500. These investments are classified as at FVTPL and thus recognized in their fair value. Fair value adjustments are not allowable by the tax authorities. 4) Bad debt provision amounts to P97,500 and relates to 2 debtors: debtor A- P60,000 (receivable originates in 2019 and 100% provision was recognized in 2020) and debtor B - P37,500 (receivable originates in 2020 and 100% provision was recognized in 2021). Tax law allows deduction of 20% of provision for debtors overdue for more than 1 year, another 30% for debtors overdue for more than 2 years and remaining 50% for debtors overdue for more than 3 years. 5) Haba accounts for inventory obsolescence provision. New provision created in 2021 was P8,100 (total provision: P13,500). This provision is not tax deductible, as it is a general provision. 6) Government grants are not taxable. Full government grant received in 2021 is included in the statement of financial position. 7) In 2021, Haba increased a liability for product warranty costs by P3,750. Product warranty costs are not tax deductible until the company pays claims. Claims paid in 2021 amounted to P4,650. 8) During the year, Haba introduced health care benefits for employees. The expenses are allowable for tax purposes only when benefits are paid but in line with PAS 19, recognized in profit or loss when employees provide service. 9) Expenses for representation and promotion included in operating expenses amount to P1,350. These are not deductible for tax purposes. 10) Tax law allows to deduct expenses for fuel only up to P3,000 per vehicle per year. Haba had 4 vehicles in 2021 and its total fuel expenses amounted to P15,450. Questions: Based on the above, answer the following: 1. What is the taxable income for 2021? 2. What is the current income tax expense for 2021? Haba Co. is a manufacturing company who wishes to calculate its taxable profit or loss for the year ended 31 December 2021. There are the statement of profit or loss and other comprehensive income, the statement of financial position and the notes below. Tax rate for 2021 is 30%, but the new tax rate of 32% for the year 2022 and beyond has already been enacted before the year end. Following are the financial statements for the period ended 31 December 2021. Statement of Financial Position as of 31 December 2021 Current Assets: Cash and cash equivalents Trade receivables Trading investments Inventories P 135,000 469,500 156,000 228,000 P 988,500 Noncurrent Assets: Property, plant and equipment Product development costs Investment in subsidiary Iksi TOTAL ASSETS Current Liabilities: Trade payables 900,000 45,000 330,000 1,275,000 P2,263,500 Health care benefits for employees P 573,000 52,500 P 625,500 Noncurrent Liabilities: Deferred income-government grants Liability for product warranty costs 30,000 12,000 Deferred tax liability (from 2020) 16,621 58,621 Equity: Share capital Accumulated profits Revaluation surplus TOTAL EQUITY & LIABILITIES 900,000 613,379 66,000 1,579,379 P2,263,500 Statement of Comprehensive Income for the year ended 31 December Revenue Less: Cost of sales Gross profit Less: Operating costs Profit from operations Less: Finance costs Profit before taxation 2021 (incomplete) P3,603,000 2,880,000 723,000 576,000 147,000 19,500 P 127,500 Additional information: 1) Depreciation expense for the year 2021 allowable in line with tax legislation is P154,500. Accounting depreciation included in operating costs is P127,500. Cost of PPE is P1,200,000 and Haba deducted expenses of P312,000 in its tax returns prior the year 2021. Moreover, as of 31 December 2021, Haba for the first time revalued its property, plant and equipment to market value of P900,000 (revaluation surplus = P66,000). 2) In 2018, Haba incurred product development costs of P75,000. These costs were recognized as an asset and amortized over period of 10 years. For tax purposes, Haba deducted full product development costs in 2018. 3) Trading investments were acquired in 2020 with cost of P172,500. These investments are classified as at FVTPL and thus recognized in their fair value. Fair value adjustments are not allowable by the tax authorities. 4) Bad debt provision amounts to P97,500 and relates to 2 debtors: debtor A- P60,000 (receivable originates in 2019 and 100% provision was recognized in 2020) and debtor B - P37,500 (receivable originates in 2020 and 100% provision was recognized in 2021). Tax law allows deduction of 20% of provision for debtors overdue for more than 1 year, another 30% for debtors overdue for more than 2 years and remaining 50% for debtors overdue for more than 3 years. 5) Haba accounts for inventory obsolescence provision. New provision created in 2021 was P8,100 (total provision: P13,500). This provision is not tax deductible, as it is a general provision. 6) Government grants are not taxable. Full government grant received in 2021 is included in the statement of financial position. 7) In 2021, Haba increased a liability for product warranty costs by P3,750. Product warranty costs are not tax deductible until the company pays claims. Claims paid in 2021 amounted to P4,650. 8) During the year, Haba introduced health care benefits for employees. The expenses are allowable for tax purposes only when benefits are paid but in line with PAS 19, recognized in profit or loss when employees provide service. 9) Expenses for representation and promotion included in operating expenses amount to P1,350. These are not deductible for tax purposes. 10) Tax law allows to deduct expenses for fuel only up to P3,000 per vehicle per year. Haba had 4 vehicles in 2021 and its total fuel expenses amounted to P15,450. Questions: Based on the above, answer the following: 1. What is the taxable income for 2021? 2. What is the current income tax expense for 2021?