ACCOUNTING FOR TAXES & EMPLOYEE BENEFITS d. 28,800.

Problem 6. For calendar year 2023, Kris Corp. reported depreciation of

1,200,000 in its income statement. On its 2023 income tax return,
1. Juan Company is in the first year of operations and reported Kris reported depreciation of 1,800,000. Kris's income statement also
pretax accounting income of 4,000,000. The entity provided the included 225,000 accrued warranty expense that will be deducted for
following information for the first year: tax purposes when paid. Kris's enacted tax rates are 30% for 2023
Premium of life insurance of key offer and 2024, and 24% for 2025 and 2026. The depreciation difference
100,000 and warranty expense will reverse over the next three years as
Depreciation on tax return in excess follows:
of book depreciation 200,000 Depreciation Difference Warranty Expense
Tax exempt interest income 50,000 2024 240,000 45,000
Warranty expense 40,000 2025 210,000 75,000
Actual warranty repair 30,000 2026 150,000 105,000
Doubtful account expense 60,000 600,000 225,000
Write-off of uncollectable accounts 20,000 These were Kris's only temporary differences. In Kris's 2023 income
Rent receive in advance 300,000 statement, the deferred portion of its provision for income taxes
Current and future taxes 30% should be
a. 200,700.
What is the taxable income for the first year? b. 112,500.
a. 4,000,000 c. 101,700.
b. 4,100,000 d. 109,800.
c. 4,200,000
d. 4,500,000 7. The following differences enter into the reconciliation of
financial income and taxable income of Angel Company for the year
2. Stressed Company reported pretax income of 2,000,000 in ended December 31, 2023, its first year of operations.
the income statement for the current year.
Tax Accounting record Life insurance expense P 100,000
Rent Income 100,000 150,000 Excess tax depreciation 2,000,000
Depreciation 300,000 250,000 Warranty expense 200,000
Payment of penalty 10,000 Litigation accrual 500,000
Premiums on officer’s life insurance 90,000 Unamortized computer software 3,000,000
Income tax rate 30% Unearned rent revenue deferred on the
books but appropriately recognized in 400,000
What is the current provision for income tax for the current year? taxable income
a. 360,000 Interest income from long-term certificate 200,000
b. 300,000 of deposit
c. 600,000
d. 2,000,000 Additional information:
 On July 1, 2023 Angel paid insurance premium of 200,000
3. Emerson Corp.'s 2023 income statement showed pretax on the life of an officer with Angel Company as beneficiary.
accounting income of 750,000. To compute the income tax liability,  Excess tax depreciation will reverse equally over a four-
the following 2023 data are provided: year period, 2024-2027.
Income from government bonds 30,000  The warranty liability is the estimated warranty cost that
Depreciation deducted for tax purposes in excess of depreciation was recognized as expense in 2023 but deductible for tax purposes
deducted for financial statement purposes 60,000 when actually paid.
Estimated income tax payments made 150,000  It is estimated that the litigation liability will be paid in
Enacted corporate income tax rate 30% 2027.
What amount of current income tax liability should be included in  In January 2023, Angel Company incurred 4,000,000 of
Hagg's December 31, 2023 statement of financial position? computer software cost. Considering the technical feasibility of the
a. 48,000 project, this cost was capitalized and amortized over 4 years for
b. 66,000 accounting purposes. However, the total amount was expensed in
c. 75,000 2023 for tax purposes.
d. 198,000  Rent revenue will be recognized during the last year of the
lease, 2027.
4. The following information was extracted from the records  Interest revenue from the from long-term certificate of
of Cooper Company on December 31, 2023: deposit is expected to be 200,000 each year until their maturity at the
end of 2027.
Carrying amount Tax base  Pretax accounting income is 10,000,000.
Accounts Receivable 1,500,000 1,750,000 Tax rate is 35%.
Motor Vehicle 1,650,000 1,250,000
Provisions for warranty 120,000 0 Based on the above and the result of your audit, compute for the
Deposit received in advance 150,000 0 following:

The depreciation rates for accounting and taxation are 15% and 25% 1. Total temporary differences
respectively. The deposits are taxable when received and warranty a. 6,400,000 b. 6,100,000
cost are deductible only when paid. The tax rate is 30%. Cooper c. 4,100,000 d. 7,100,000
Company should report a deferred tax liability on December 31, 2023
at 2. Deferred tax liability
a. 120,000 a. 1,050,000 b. 2,100,000
b. 156,000 c. 1,890,000 d. 1,750,000
c. 81,000
d. 36,000 3. Deferred tax asset
a. 385,000 b. 245,000
5. On January 1, 2023, Kris Corp. purchased 40% of the c. 1,085,000 d. 210,000
voting common stock of Tris, Inc. and appropriately accounts for its
investment by the equity method. During 2023, Tris reported earnings 4. Current income tax expense
of 360,000 and paid dividends of 120,000. Kris assumes that all of a. 2,100,000 b. 2,800,000
Tris' undistributed earnings will be distributed as dividends in future c. 1,750,000 d. 1,820,000
periods when the enacted tax rate will be 30%. Ignore the dividend-
received deduction. Kris's current enacted income tax rate is 25%. 5. Total income tax expense
The increase in Kris's deferred income tax liability for this temporary a. 3,535,000 b. 3,465,000
difference is c. 3,500,000 d. 4,830,000
a. 72,000.
b. 60,000. 8. The December 31, 2023 income statement of
c. 43,200. Batista co. showed the following information:
Net income before income taxes 3,900,000 Discount rate 8%
Income tax (35%) (1,365,000)
Net income after tax 2,535,000 What is the current service cost for 2023?
In your audit of the income tax and related account you discovered a. 675,000
the following information: b. 810,000
c. 540,000
 At December 31, 2023, the company has a 900,000 liability d. 255,000
reported for estimated litigation claims. This 900,000 balance
represents amounts which has been charged to the current income but 12. Jerome Company provided the following information:
is not tax deductible until paid. The company expects to pay the January1 December 31
claims and thus have tax deductible amounts in the future in the Fair value of plan assets 3,500,000 3,900,000
following manner: P350, 000 to be paid in 2024, P490, 000 to be paid Market related value of plan assets 2,800,000 2,900,000
in 2025 and P60, 000 to be paid in 2026.
Contribution to the plan 280,000
Benefits paid to retirees 250,000
 The Company started using the different depreciation
method for tax purposes during the current year. Consequently, at
What is the actual return on plan assets for the current year?
December 31, 2023, the company has a temporary difference
a. 400,000
amounting 2,400,000 due to depreciable property. This amount is to b. 370,000
result to taxable amounts in future years at the rate of 480,000 from c. 430,000
2024 to 2028. d. 100,000
 The income tax rates enacted at the beginning of 2023 are
as follows: 2023 and 2024, 35%; 2025 and later 30% 13. Angel Company had the following balances relating to the
defined benefit plan on December 31, 2023:
How much is the current portion of the Batista’s income tax expense Fair value of plan assets 37,000,000
for the year 2023? Projected benefit obligation 33,000,000
a. 1,365,000 Asset ceiling
b. 1,296,500 2,500,000
c. 840,000
d. 1,314,000 What is the prepaid benefit cost on December 31, 2023?
a. 4,000,000
How much is the adjusted net income of Batista for the year 2023? b. 1,500,000
a. 2,586,000 c. 2,500,000
b. 2,603,500 d. 0
c. 2,535,000
d. 2,400,000 14. On January 1, 2023, Jerome Company reported fair value
of plan assets at 6,500,000 and projected benefit obligation at
9. On January 1, 2023 Angel Company had the following 7,500,000. During the current year, the entity determined that the
balances related to a defined benefit plan: current service cost was 1,200,000 and the discount rate is 10%. The
actual return on plan assets was 800,000 during the year. Other
Fair Value of Plan Asset 8,710,500 information during the year related to the defined benefit plan is as
Projected Benefit Obligation 10,500,500 follows:
Contribution to the plan 1,200,000
Angelika provided the following data for the current year: Benefits paid to retires 1,500,000
Decrease in projected benefit obligation due
to change in actuarial assumptions 200,000
Current service cost 710,000
Settlement discount rate 8%
Q1. What is the employee benefit expense?
Actual Return on Plan assets 850,000 a. 1,300,000
Contribution to the Plan 999,000 b. 1,950,000
Benefits paid to retirees 195,500 c. 1,200,000
d. 1,100,000
What is the employee benefit expense?
a. 675,000 Q2. What is the total remeasurement gain?
b. 600,000 a. 350,000
c. 853,200 b. 150,000
d. 650,000 c. 200,000
d. 800,000
10. On January 1, 2023, Kaila Company reported fair value on
plan assets at 6,500,000 and projected benefit obligation at 7,500,000. Q3. What is the fair value of plan assets on December 31?
a. 7,000,000
During the current year, the entity determined that the current service b. 8,500,000
cost was 1,200,000 and the discount rate is 10%. The actual return on c. 8,350,000
plan assets was 800,000 during the year. d. 7,550,000

The entity provided the following information during the year related Q4. What is the projected benefit obligation on December 31?
to the defined benefit plan. a. 7,750,000
b. 8,700,000
Contribution to the plan 1,200,000 c. 9,250,000
Benefits paid to retirees 1,500,000 d. 7,950,000
Decrease in projected benefit obligation
due to change in actuarial assumptions 200,000 15. On January 1, 2023, Trisha Company reported the fair
value of plan assets at 6,000,000 and projected benefit obligation at
8,000,000. During the year, the entity made a lump sum payment too
What is the total remeasurement gain?
certain plan participants in exchange for their rights to receive
a. 350,000
specified postemployment benefits. The lump sum payment was
b. 150,000
800,000 and the present value of the defined benefit obligation settled
c. 200,000 was 1,000,000. In addition, the following data are gathered during the
d. 800,000 current year:
Current service cost 900,000
11. Ozz Company had a noncontributory defined benefit Actual return on plan assets 800,000
pension plan. On December 31, 2023, the entity received the Contribution to the plan 700,000
projected benefit obligation report from the independently actuary. Discount rate
Pension benefits paid 135,000 12%
PBO on December 31, 2023 2,160,000
Interest expense 120,000 Q1. What is the employee benefit expense?
a. 1,140,000
b. 1,860,000
c. 900,000
d. 940,000

Q2. What is the fair value of plan assets on December 31?

a. 7,500,000
b. 6,700,000
c. 6,000,000
d. 5,900,000

Q3. What is the projected benefit obligation on December 31?

a. 8,900,000
b. 8,860,000
c. 9,680,000
d. 9,060,000

Q4. What is the accrued benefit cost on December 31?

a. 2,160,000
b. 2,000,000
c. 3,160,000
d. 2,240,000

16. Joshtin Company provided the following information

during 2023:
January 1 December 31
Fair value of plan assets 6,000,000 7,900,000
Projected benefit obligation 5,000,000 5,900,000
Prepaid/accrued benefit cost- surplus 1,000,000 2,000,000
Asset ceiling 700,000 1,200,000
Effect of asset ceiling 300,000 800,000
During the current year, the following data are gathered:
Current service cost 700,000
Past service cost 200,000
Actual return on plan assets 900,000
Decrease in projected benefit obligation due
change in actuarial assumptions 1,000,000
Discount rate 10%

Q1. What is the employee benefit expense?

a. 830,000
b. 900,000
c. 800,000
d. 870,000

Q2. What is the net remeasurement gain?

a. 330,000
b. 800,000
c. 300,000
d. 500,000
e. 830,000