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What amount should be reported as deferred tax liability

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Reference no: EM132706787

Problem 1: Regal Company paid P400,000 in January 2019 for fire insurance premiums on a two-year policy. Additionally, the financial statements for the year ended December 31, 2019 revealed that the entity paid P1,050,000 in income tax during the year and also accrued estimated litigation loss of P2,000,000. The lawsuit was resolved in February 2020 at which time a P2,000,000 loss was recognized for tax purposes. The entity used the cash basis for tax purposes. The tax rate is 30% for both 2019 and 2020. What amount should be reported as deferred tax asset on December 31, 2019?

a. 630,000

b. 540,000

c. 600,000

d. 0

Problem 2 What amount should be reported as deferred tax liability on December 31, 2019?

a. 120,000

b. 90,000

c. 60,000

d. 0

Reference no: EM132706787

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