McCloud Corporation owns equity-method investments in several companies. McCloud paid$1,800,000 to acquire a 30% investment in Brown Software Company. Brown reported netincome of $660,000 for the first year and declared and paid cash dividends of $460,000.Requirements1. Record the following in McCloud’s journal: (a) the purchase of the investment,(b) McCloud’s proportion of Brown’s net income, and (c) the receipt of the cash dividends.2. What is the ending balance in McCloud’s investment account?

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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.