Item38

Item 38

B Co. reported a deferred tax liability of $24 million for the year ended December 31, 2020, related to a temporary difference of $60 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 20% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $100 million. Required: Determine the effect of the change and prepare the appropriate journal entry to record Bs income tax expense in 2021. (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).)