Deferred Tax (Appendix)

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

Required 1. Determine the effect on the accounting equation 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. Explain why the Deferred Tax liability account exists.

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Deferred tax 2008 2007 $180 $200 Included in the income statement are the following amounts related to income taxes: 2008 2007 Income before tax $500 $400 Tax expense 100 150 Net income $400 $250