During its first three years of operations a company reported pre-tax book income of $1,000,000 in year 1, ($1,800,000) in year 2, and $3,000,000 in year 3. The income tax rate applicable to each of the years was 21%. Assume that there weren't any temporary differences and a valuation allowance was not necessary. What amount of income tax expense was reported by the company in year 3 with respect to the net operating loss carryforward? Multiple Choice $880,000 $630,000 $ 378,000 $ 252,000

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…