Pruett Corporation Began Operations in 2013 and Appropriately Recorded a Deferred

question 16

Multiple Choice

Pruett Corporation began operations in 2013 and appropriately recorded a deferred tax liability at the end of 2013 and 2014 based on the following depreciation temporary differences between pretax financial income and taxable income:
The income tax rate for 2013 and 2014 was 30%. In February 2015, due to budget constraints, Congress enacted an income tax rate of 35%. The journal entry required to adjust the Deferred Tax Liability account in February 2015 would be

• A) Loss on Adjustment of Deferred Taxes \(\quad \)30 Deferred Tax Liability \(\quad \)\(\quad \)30
• B) Deferred Tax Liability \(\quad \)\(\quad \)\(\quad \)30 Gain on Change in Tax Rates \(\quad \)\(\quad \)\(\quad \)30
• C) Income Tax Expense \(\quad \)\(\quad \)10 Deferred Tax Liability \(\quad \)\(\quad \)\(\quad \)\(\quad \)10
• D) Income Tax Expense \(\quad \)\(\quad \)30 Deferred Tax Liability \(\quad \)\(\quad \)\(\quad \)\(\quad \)30

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