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Deferred tax liability $ 355,000 $ 463,000 The income statement reported tax expense for Year 2 in the amount of $580,000. Required: 1. What was the amount of income taxes payable for Year 2

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Answer: $472,000

Explanation:

Deferred Tax Liability arises as a result of the different accounting methods used by Companies and by the Government for taxation.

Deferred tax liabilities are taxes that are owed to the Government due to the company using the Accrual system but as the Government uses the Cash basis, they have not yet recognised this tax.

The Tax Payable in Year 2 is;

= Reported Tax Expense -  increase in Deferred Tax liability

= 580,000 - (463,000 - 355,000)

= $472,000

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