On December 31, 2016, the Town Hall Company had a deferred tax liability balance of $12,570, arising from an excess of MACRS depreciation for tax purposes over straight-line depreciation for accounting purposes. The tax effects of that timing difference are expected to reverse in the following years:
?
Timing
Enacted
Deferred
Year
Difference
Tax Rate
Tax Liability
2017
$ 16,000
30%
$ 4,800
2018
9,500
35%
3,325
2019
12,700
35%
4,445
?
?
?
$12,570
On January 27, 2017, Congress raised the effective income tax rate to 38% for all future years, including the current year, 2017.
?
Required:Prepare the entry to record any adjustments necessary due to the income tax rate increase on January 27, 2017.
What will be an ideal response?
| Income Tax Expense | 1,946 | ? | |
| ? | Deferred Tax Liability [($38,200´.38)-$12,570] | ? | 1,946 |
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