Prepare the entry record any adjustments required

Reference no: EM136081

On 31^st December, 2010 the south Padre Company had a deferred tax liability balance of $8100 starting from an excess of MACRS depreciation for tax purpose over straight line depreciation for accounting purposes. The tax effects of that timing difference are expected to reverse in the subsequent years:

Year timing difference enacted tax rate Deferred tax liability

2011 6000 30% 1800

2012 8000 35% 2800

2013 10000 35% 3500

8100

On 27^th January, 2011, Congress raised effective income tax rate to 38 percent for all future years, including the existing year, 2011.

Required:

Prepare the entry record any adjustments required due to the income tax rate increase on 27^th January, 2011.

Reference no: EM136081

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