Bronson Industries reported a deferred tax liability of $8 million for the year ended December 31, 2017, relatedto a temporary difference of $20 million. The tax rate was 40%. The temporary difference is expected to reversein 2019, at which time the deferred tax liability will become payable. There are no other temporary differences in2017–2019. Assume a new tax law is enacted in 2018 that causes the tax rate to change from 40% to 30% beginning in 2019. (The rate remains 40% for 2018 taxes.) Taxable income in 2018 is $30 million.Required:1. Determine the effect of the change and prepare the appropriate journal entry to record Bronson’s income taxexpense in 2018.2. What adjustment, if any, is needed to revise retained earnings as a result of the change?
Bronson Industries reported a
to a temporary difference of $20 million. The tax rate was 40%. The temporary difference is expected to reverse
in 2019, at which time the deferred tax liability will become payable. There are no other temporary differences in
2017–2019. Assume a new tax law is enacted in 2018 that causes the tax rate to change from 40% to 30% beginning in 2019. (The rate remains 40% for 2018 taxes.) Taxable income in 2018 is $30 million.
Required:
1. Determine the effect of the change and prepare the appropriate
expense in 2018.
2. What adjustment, if any, is needed to revise
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