B Co Reported a Deferred Tax Liability of $24 Million for for the Year

question 92

Essay

B Co. reported a deferred tax liability of $24 million for the year ended December 31, 2017, related to a temporary difference of $60 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 $90 million.
Required:
Determine the effect of the change and prepare the appropriate journal entry to record B's income tax expense in 2018. What adjustment, if any, is needed to revise retained earnings as a result of the change?

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Definitions:

Tariffs

Taxes imposed on imported goods, which can affect international trade by increasing the cost of goods and services.

Internationalization

The process of designing products, services, and strategies in a way that they can be adapted to various cultural and geographical markets.

Economic Interdependence

Economic interdependence is the condition in which countries or regions depend on each other for goods, services, and resources, leading to a network of economic relationships.

Cultural Interdependence

The phenomenon where cultures influence and are influenced by other cultures, leading to a state where they become increasingly reliant on one another.