Deferred Tax (Appendix)

Erinn Corporation has compiled its 2008 financial statements. Included in the Long-Term Liabilities category of the balance sheet are the following amounts:

Required 1. Prepare the journal entry in 2008 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 2008 balance sheet is $180?

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Deferred tax 2008 2007 $180 $100 Included in the income statement are the following amounts related to income taxes: 2008 2007 Income before tax $500 $400 Tax expense 200 160 Net income $300 $240