Tower Corp. began operations on January 1, 1990. For financial reporting, Tower recognizes revenues from all sales under the accrual method. However, in its income tax returns, Tower reports qualifying sales under the installment method. On December 31, 1991, Tower's gross profit on these installment sales under each method was as follows:

The difference goes into a liability account that increases every year until reversal occurs.  The question did not indicate that any reversal occurred in 1991 related to the liability of 1990 so when the liability for 1991 was recorded, it increased the balance in the liability account over and above what was there in 1990.

Entries:

1990

Income Tax Expense (1,600,000*0.3)       &am p;nb sp; 480,000

       Income Tax Payable (600,000*0.3)         ; ;         180,000

       Deferred Tax Liability (1,000,000*0.3)       &am p;nb sp;     300,000

1991

Income Tax Expense (2,600,000*0.3)       &am p;nb sp;  780,000

       Income Tax Payable (1,400,000*0.3)       &am p;nb sp;       420,000

       Deferred Tax Liability (1,200,000*0.3)               360,000

Remember that, in general, Balance Sheet accounts are cumulative.  The total in the Deferred Tax Liability account at the end of 1991 (since nothing has been reversed) is 300,000+360,000=660,000.