Acme Company uses an accelerated depreciation method for income tax purposes and the straight-line depreciation method for financial reporting purposes. As of December 31, 2018, Acme has a $100,000 taxable temporary difference (tax-effected amount) on its balance sheet related to the book and tax basis difference in fixed assets (from depreciation). In 2019, depreciation for income tax purposes was $200,000, while depreciation for financial reporting purposes was $260,000. If the income tax rate is 25% and no other temporary or permanent differences exist, what would the ending deferred tax balance as of 12/31/19 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.