Erinn Corporation has compiled its 2012 financial statements. Included in the Long-Term Liabilities category of the balance sheet are the following amounts:

________________________    2012     2011

Deferred tax.....................$180....$100

Included in the income statement are the following amounts related to income taxes:

_______________________        2012     2011

Income before tax..............$500...$400

Tax expense.......................200....160

Net income......................$300...$240

In the notes that accompany the 2012 statement are the following amounts:

______________________________2012

Current provision for tax...............$120

Deferred portion............................80

Required

1. Identify and analyze the effect of the transaction in 2012 for income tax expense, deferred tax, and income tax payable.

2. Assume that a stockholder has inquired about the meaning of the numbers recorded and disclosed about deferred tax. Explain why the Deferred Tax liability account exists. Also, what do the terms current provision and deferred portion mean? Why is the deferred amount in the note $80 when the deferred amount on the 2012 balance sheet is $180?