Use the following information for Problems 30 and 31. On March 15, Calloway, Inc., paid property taxes of $480,000 for the calendar year. 30.  How much of this expense should Calloway’s income statement reflect for the quarter ending March 31? a. –0– b. $40,000 c. $120,000 d. $480,000 31. The journal entry at March 15 to record the payment of property taxes would include which of the following? a. A debit to Property Tax Expense of $480,000 b. A credit to Cash of $120,000 c. A debit to Prepaid Property Taxes of $360,000 d. A credit to Prepaid Property Taxes of $40,000

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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.