Deferred tax liability, B Co. reported a deferred tax

Deferred tax liability

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Reference no: EM131211164

B Co. reported a deferred tax liability of $24 million for the year ended December 31, 2015, related to a temporary difference of $60 million. The tax rate was 40%. The temporary difference is 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 40% to 30% beginning in 2017. (The rate remains 40% for 2016 taxes.) Taxable income in 2016 is $90 million.

Required:

Determine the effect of the change and prepare the appropriate journal entry to record B’s income tax expense in 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

Record the income tax expense in 2016.

Reference no: EM131211164

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