On January 1, 2009, Warren Co. purchased a $600,000 machine with a five year useful life and no salvage value. The machine was depreciated by an accelerated method for book and tax purposes. The carrying value was $240,000 on December 31, 2010. On January 1, 2011, Warren changed to the straight line method for financial reporting purposes. Warren can justify the change. Warrens income tax rate is 30%

1. In its 2011 income statement, what amount should Warren report as the cumulative effect of this change?

2. On January 1, 2011, what amount should Warren report as deferred income tax liability as a result of the change?