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?

---

Definitions:

Body Mass Index (BMI)

A numerical computation that assesses an individual's body weight in relation to their height, used as an indicator of obesity and underweight.

DSM-5

The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, a comprehensive classification and diagnostic tool used by mental health professionals.

DSM-5

The fifth edition of the Diagnostic and Statistical Manual of Mental Disorders, a comprehensive classification of mental health conditions published by the American Psychiatric Association.

Restricting Type

A subtype of anorexia nervosa characterized by severe limitation of calorie intake without engaging in binge-eating or purging behavior.