PROBLEM 6: MULTIPLE CHO 1. Pine Corp.'s books showed pretax income of P800,000 for the year ended December 31, 20x1. In the computation of federal income taxes, the, following data were considered: Gain on an involuntary conversion (expropriation) Depreciation deducted for tax purposes in excess of depreciation deducted for book Estimated tax payments during 20x1 350,000 50,000 purposes 70,000 30% Income tax rate What amount should Pine report as its current income tax liability on its December 31, 20x1, balance sheet? a. 50,000 b. 65,000 c. 120,000 d. 135,000 (AICPA)

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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.