Yen Inc.'s only temporary difference at the beginning and end of 2014 is caused by a $3.3-million deferred gain for tax purposes on an installment sale of a plant asset. The related receivable (only one half of which is classified as a current asset) is due in equal installments in 2015 and 2016. The related deferred tax liability at the beginning of the year is $990,000. In the third quarter of 2014, a new tax rate of 29% is enacted into law and is scheduled to become effective for 2016. Taxable income is expected in all future years.
Instructions
(a) Determine the amount to be reported as a deferred tax liability at the end of 2014. Indicate its proper classification(s) if Yen Inc. applies ASPE.
(b) Indicate the classification of the deferred tax asset or liability account if Yen Inc. applies IFRS.
(c) Prepare the journal entry (if any) that is necessary to adjust the deferred tax liability when the new tax rate is enacted into law.