Recording Income Tax with Changing Tax Rates The Jets Company recorded a deferred tax liability of $18,750 on December 31 of Year 1, due to the book value of equipment exceeding the tax basis of equipment by $75,000. The difference will reverse equally ver the next three years. In late Year 1, the enacted tax rate increased to 42.5% beginning in Year 3. . Determine the income tax rate that is the enacted rate for Year 1. ncome tax rate for Year 1: 42.5 96 - What journal entry should the Jets record to adjust the deferred tax liability, if any, on December 31 of Year 1? Reversal of difference between GAAP and tax bases $ ax rate Deferred tax liability Date sec. 31, Year 1 Account Name $ Year 2 v 0$ 0% 0$ Dr. 0 Year 3 Cr. 0 0 $ 0% 0$ Year 4 0 0% 0$ Total 0
Recording Income Tax with Changing Tax Rates The Jets Company recorded a deferred tax liability of $18,750 on December 31 of Year 1, due to the book value of equipment exceeding the tax basis of equipment by $75,000. The difference will reverse equally ver the next three years. In late Year 1, the enacted tax rate increased to 42.5% beginning in Year 3. . Determine the income tax rate that is the enacted rate for Year 1. ncome tax rate for Year 1: 42.5 96 - What journal entry should the Jets record to adjust the deferred tax liability, if any, on December 31 of Year 1? Reversal of difference between GAAP and tax bases $ ax rate Deferred tax liability Date sec. 31, Year 1 Account Name $ Year 2 v 0$ 0% 0$ Dr. 0 Year 3 Cr. 0 0 $ 0% 0$ Year 4 0 0% 0$ Total 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Recording Income Tax with Changing Tax Rates
The Jets Company recorded a deferred tax liability of $18,750 on December 31 of Year 1, due to the book value of equipment exceeding the tax basis of equipment by $75,000. 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: 42.5
%
b. What journal entry should the Jets record to adjust the deferred tax liability, if any, on December 31 of Year 1?
Reversal of difference between GAAP and tax bases $
Tax rate
Deferred tax liability
Date
Dec. 31, Year 1
Check
Account Name
To adjust the deferred tax liability,
$
Year 2
>
>
0 $
0%
0 $
Dr.
0
0
Year 3
Cr.
0
0
0 $
0%
0 $
Year 4
0
0%
0 $
Total
0
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