Rice Corp. has tax depreciation in excess of financial reporting depreciation of $100,000 in 20X1. The timing difference is expected to reverse $30,000 in 20X2 and $70,000 in 20X3. In 20X1, the enacted tax rates were 40% for 20X1 and thereafter. However, during 20X2, the enacted rate was changed to 30% for years 20X3 and thereafter. Rice records the journal entry for deferred taxes at the end of 20X2 at the tax rate of 40%, and then prepares an adjusting entry to appropriately revalue the deferred tax account at year-end. What entry is required to record the adjusting entry for the change in enacted tax rates?

deferred income tax liability 7,000 debit

retained earnings   7,000   credit

Explanation:

currently the company has a tax liability as it will pay more taxes when the depreciation for tax purposes ended lower than their accounting depreciation.

We must adjust for 20X3 as will be taxed at 30% instead of 40%

the difference will be for 7,000

70,000 x 10% = 7,000

This will decrease the tax liability and the company will have to adjust their retained earnigs as their previoius inocme statement for 20X1 consider taxes 7,000 higher than actual taxes levied.

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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