At the end of 2019, Sentry Company reported a deferred tax liability of $6,120 based on an income tax rate of 30%. On January 2, 2020, Congress changed the income tax rate to 35%.Required:1.Calculate the amount of the adjustment to Sentry’s 2019 year-end deferred tax liability.2.Prepare the journal entry to correct Sentry’s deferred tax liability.

Answered: At the end of 2019, Sentry Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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At the end of 2019, Sentry Company reported a deferred tax liability of $6,120 based on an income tax rate of 30%. On January 2, 2020, Congress changed the income tax rate to 35%.

Required:

1.	Calculate the amount of the adjustment to Sentry’s 2019 year-end deferred tax liability.
2.	Prepare the journal entry to correct Sentry’s deferred tax liability.

Expert Solution

Step 1

Revised deferred tax liability:

= ($6,120/30%)*35%

=$7,140

Amount of the adjustment to Sentry 's 2019 year end deferred tax deferred tax liability

= Revised deferred tax liability - Current deferred tax liability

= $7149 -$6120

=$1020

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