2. On January 1, 2019, KRIS KRINGLE Company purchased a ₱600,000 machine, with a five-year useful life and no residual value. The machine was depreciated by an accelerated method for book and tax purposes. The carrying amount was ₱240,000 on December 31, 2020. On January 1, 2021, the entity changed to the straight-line method for financial reporting purposes. The income tax rate is 30%. On January 1, 2021, what amount should be reported as deferred tax liability as a result of the change?   ₱ 36,000   ₱ - 0 -   ₱ 72,000   ₱ 120,000

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Q: financial reporting

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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.