Bonita Corp. has a deferred tax asset account with a balance of $67,500 at the end of 2019 due to a single cumulative temporary difference of $337,500. At the end of 2020, this same temporary difference has increased to a cumulative amount of $448,200. Taxable income for 2020 is $864,500. The tax rate is 20% for all years. At the end of 2019, Bonita Corp. had a valuation account related to its deferred tax asset of $48,900.

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 autho…