West Company disclosed the following assets and liabilities at carrying amount at year-end: Property 10,000,000 Plant and
Question:
West Company disclosed the following assets and liabilities at carrying amount at year-end:
Property 10,000,000
Plant and equipment 5,000,000
Inventory 4,000,000
Trade receivables 3,000,000
Trade payables 6,000,000
Cash 2,000,000
The value for tax purposes for property and for plant and equipment was P7,000,000 and P4,000,000 respectively.
The entity has made a provision for inventory obsolescence of P2,000,000 which is not allowable for tax purposes.
Further, an impairment charge against trade receivables of P1,000,000 has been made. This charge will not be allowed in the current year for tax purposes.
West Company reported accounting income before tax of P9,000,000 for the current year.
There are no temporary differences at the beginning of the current year. The tax rate is 30%.
Required:
1. Prepare journal entry to record the current tax expense.
2. Prepare journal entry to record the deferred tax liability.
3. Prepare journal entry to record the deferred tax asset.
4. Determine the net deferred tax expense or benefit.
5. Determine the total income tax expense.