Nash Corporation has one temporary difference at the end of 2020 that will reverse and cause taxable amounts of $50,400 in 2021, $55,900 in 2022, and $61,100 in 2023. Nash’s pretax financial income for 2020 is $311,400, and the tax rate is 30% for all years. There are no deferred taxes at the beginning of 2020. (a)     Compute taxable income and income taxes payable for 2020.

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A: SOLUTION-                                                                     INCOME STATEMENT…

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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.