Answered

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Dana Co. had a deferred tax liability balance due to a temporary difference at the beginning of 2019 related to $900,000 of excess depreciation. In December of 2019, a new income tax act is signed into law that lowers the corporate rate from 40% to 30%, effective January 1, 2021. If taxable amounts related to the temporary difference are scheduled to be reversed by $450,000 for both 2020 and 2021, Dana should increase or decrease deferred tax liability by what amount

Sagot :

abiolataiwo2015

Answer:

$45,000 decrease

Explanation:

Calculation to determine the amount that Palmer should increase or decrease deferred tax liability

Increase or decrease deferred tax liability =$450,000 × (.30 - .40)

Increase or decrease deferred tax liability=-$45,000 decrease

Therefore Dana should DECREASE deferred tax liability by $45,000

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