The Jets Company recorded a deferred tax liability of $37,500 on December 31 of Year 1, due to the book value of equipment exceeding the tax basis of equipment by $150,000. The difference will reverse equally over the next three years. In late Year 1, the enacted tax rate increased to 42.5% beginning in Year 3.

a. Determine the income tax rate that is the enacted rate for Year 1. Income tax rate for Year 1: Answer%

b. What journal entry should the Jets record to adjust the deferred tax liability, if any, on December 31 of Year 1?

	Year 2	Year 3	Year 4	Total
Reversal of difference between GAAP and tax bases	Answer	Answer	Answer
Tax rate	Answer	Answer	Answer
Deferred tax liability

Date	Account Name	Dr.	Cr.
Dec. 31, Year 1			Answer
			Answer