Andee Company has cumulative taxable temporary differences on December 31, 2020 and December 31, 2019 of P1,350,000 and P960,000 respectively

Finance Dec 14, 2020

Andee Company has cumulative taxable temporary differences on December 31, 2020 and December 31, 2019 of P1,350,000 and P960,000 respectively. The tax rate enacted for 2020 is 40% while the tax rate enacted for future years is 30%. Taxable income for 2020 is P2,400,000 and there are no permanent differences.

What is the pretax financial income for 2020?

A. 2,790,000

B. 2,010,000

C. 1,050,000

D. 3,750,000

Expert Solution

Computation of Pretax Financial Income for 2020:

Given,

Cumulative Taxable Temporary Differences on December 31, 2019 = P960,000

Cumulative Taxable Temporary Differences on December 31, 2020 = P1,350,000

Net Temporary Difference to Account for in the Year 2020 = P1,350,000 - P960,000 = P390,000

So,

Pretax Financial Income = P2,400,000+ P390,000 = P2,790,000

So, the correct option is A "2,790,000".

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