Deferred Tax (Appendix) Erinn Corporation has compiled its 2010 financial statements. Included in the Long-Term Liabilities category of the balance sheet are the following amounts:

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

In the notes that accompany the 2010 statement are the following amounts:

Required
1. Identify and analyze the effect of the transaction in 2010 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 2010 balance sheet is$180?

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2010 2009 Deferred tax S180 $100 2010 2009 Income before tax lax expense $500 200 $300 $400 160 $240 Net income 2010 Current provision for tax Deferred portion $120 80