EZ, Inc., reports pretax accounting income of $427,000, but due to a single temporary difference, taxable income is $530,000. At the beginning of the year, no temporary differences existed. EZ is subject to a tax rate of 25%. Prepare the appropriate journal entry to record EZ's income taxes.

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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.