Parker Company identifies depreciation as the only difference for future taxable amounts. In Year 1, its depreciation for financial reporting purposes is $9,000 and $10,500 for income tax reporting purposes. Parker has an income tax rate of 35%. Assume that Parker’s taxable income for Year 1 is $150,000. Required:   Prepare the journal entry to record Parker’s income tax expense.

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A:

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Q: s pretax financial income of $68,400 for 2020. The following items cause taxable income to be…

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.