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

question 99

Essay

B Co. reported a deferred tax liability of $24 million for the year ended December 31, 2008, related to a temporary difference of $60 million. The tax rate was 40%. The temporary difference is expected to reverse in 2010 at which time the deferred tax liability will become payable. There are no other temporary differences in 2008-2010. Assume a new tax law is enacted in 2009 that causes the tax rate to change from 40% to 30% beginning in 2010. (The rate remains 40% for 2009 taxes.) Taxable income in 2009 is $90 million.
Required:
Determine the effect of the change and prepare the appropriate journal entry to record B's income tax expense in 2009. What adjustment, if any, is needed to revise retained earnings as a result of the change?

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Definitions:

Olfactory Cortex

A brain region involved in the processing and perception of odors, part of the olfactory system.

Tonic Nature

Describes a characteristic of substances or medications that have a strengthening or invigorating effect on the body or bodily systems.

Phasic Nature

Refers to something that occurs in distinct phases or stages, often used in context with physiological or behavioral patterns.

Stereocilia

Hairlike projections on the surface of certain cells, such as those in the inner ear, that respond to fluid motion for sensory functions including hearing and balance.