Question
Bronson Industries reported a deferred tax liability of $7.75 million for the year ended December 31, 2020, related to a temporary difference of $31 million.
Bronson Industries reported a deferred tax liability of $7.75 million for the year ended December 31, 2020, related to a temporary difference of $31 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022 at which time the deferred tax liability will become payable. There are no other temporary differences in 20202022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $41 million.
Required: 1. Prepare the appropriate journal entry to record Bronsons income tax expense in 2021.
No | Transaction | General Journal | Debit | Credit |
---|---|---|---|---|
1 | 1 | Income tax expense | 7.15 | |
Deferred tax liability | 3.10 | |||
Income tax payable | 10.25 |
2. What effect, will enacting the change in the 2022 tax rate, have on Bronsons 2021 net income?
Bronsons 2021 net income will increase by ?????? million
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