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At the beginning of 2021, a company had future deductible amounts of $400,000 and the enacted tax rate was 27%. In October 2021, a new income tax act is

At the beginning of 2021, a company had future deductible amounts of $400,000 and the enacted tax rate was 27%. In October 2021, a new income tax act is

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the beginning of 2021, a company had future deductible amounts of $400,000 and the enacted tax rate was 27%. In October 2021, a new income tax act is signed into law that lowers the tax rate to 20% for 2022 and future years. To record the change, the company will (enter 1, 2, 3, or 4 that represents the correct answer):

  1. Credit Income Tax Expense by $28,000.
  2. Debit Income Tax Expense by $28,000.
  3. Credit Deferred Tax Liability by $28,000.
  4. Debit Deferred Tax Asset by $28,000.
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