Sheridan Co. purchased machinery that cost $3250000 on January 4, 2019. The entire cost was recorded as an expense. The machinery has a 9-year life and a $225000 residual value. The error was discovered on December 20, 2021. Ignore income tax considerations. Sheridan's income statement for the year ended December 31, 2021, should show the cumulative effect of this error in the amount of $2577778. $2213889. $0. $2527778.

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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.