At the end of 2013, Valerie Corporation reported a deferred tax liability of $31,000. At the end of 2014, the company had $201,000 of temporary differences related to property, plant, and equipment. Depreciation expense on this property, plant, and equipment has been lower than the CCA claimed on Valerie's income tax returns. The resulting future taxable amounts are as follows:
2015........................$ 67,000
2016...........................50,000
2017...........................45,000
2018...........................39,000
..............................$201,000
The tax rates enacted as of the beginning of 2013 are as follows: 31% for 2013 and 2014; 30% for 2015 and 2016; and 25% for 2017 and later. Taxable income is expected in all future years.
Instructions
(a) Calculate the deferred tax account balance at December 31, 2014.
(b) Prepare the journal entry for Valerie to record deferred taxes for 2014.
(c) Early in 2015, after the 2014 financial statements were released, new tax rates were enacted as follows: 29% for 2015 and 27% for 2016 and later. Prepare the journal entry for Valerie to recognize the change in tax rates.