Acct2206 Registrationtxyn) C | eztomheducation.comhmtpx DSign Inl McGraw Hill\'s

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Acct2206 Registrationtxyn) C | eztomheducation.comhmtpx DSign Inl McGraw Hill's -2 (2 unread). mkennen2 , Ch. 16 Homework x 3. 10.00 points on Industries reported a deferred tax liability of $8 1 million for the year ended December 31, 2015, related to a temporary difference of S27 million The tax rate was 30% The temporary diferecek expected to reverse in 2017 at which time the deferred tax liability will become payable. There are no other temporary differences in 2015-2017 Assume a new tax law is enacted in 2016 that causes the tax rate to change from 30 to 20% beg ning in 2017 The rate remains 30% for 2016 taxes Taxable income n 2016 is $37 million Bronso Required Prea tooumal enty to ecord Brensan's income tax expense in 2016 Whit djustmen. any, is needed to revise retained earnings as a result of the change? (I no entry is required for a transactionlevent, select "No journal entry required" in the first account field. Enter your answers in millions and round your answers to 1 decimal place.) View transaction list Journal entry worksheet Record 2016 income taxes Note: Enter debits before credts Debit Record emry Char entry View gemeral journal TOSHIBA esc 2 3 4 5

Explanation / Answer

Books of Bronson Industries

Journal Entries

2015

Dec 31 Profit and Loss account Dr 8.1 million

To Deferred Tax Liability A/c 8.1 million

(Being deferred tax liability created)

2016

Dec 31 Deferred Tax Liability A/c Dr 2.7 million

To Profit and Loss account 2.7 million

(Being deferred tax liability amount changed due to change in tax rate)

Workings

Amount of deferred tax liability to be written off = Timing Difference not realised x (Old Tax rate - New Tax Rate)

= 27 million x (30-20) %

= 2.7 million

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