At the end of 2017 Buckeyes industries had a deferred tax asset account with a balance of $28 million attributable to a temporary book tax difference of $70million in a library for estimated expenses. At the end of 2018, the temporary difference is $75 million. Buckeyes has no other temporary differences. Taxable income for 2018 is $200 million and the tax rate is 40%. Buckeyes has a valuation allowance of $12 million for the deferred tax asset at the beginning of 2018. Prepare the journal entry to record Buckeyes income taxes for 2018, assuming it is more likely than not that the deferred tax asset will be realized . Prepare the journal entry to record Buckeyes income tax for 2018, assuming it is more likely than not that two-thirds of the deferred tax asset will ultimately be realized

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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.