Ellwood Ltd has the following deferred tax balances in its statement of financial position at 30 June 2012.

Deferred tax asset $1,000,000

Deferred tax liability $ 800,000

The above balances were calculated when the tax rate was 30%. On 1 December 2012 the government raises the company tax rate to 35%.

Required

1. Provide the journal entries to adjust the carry forward balances of the deferred tax asset and the deferred tax liability.