At December 31, 2010 Raymond Corporation reported a deferred tax liability of $90,000 which was attributable to a taxable type temporary difference of $300,000.The temporary difference is scheduled to reverse in 2014.During 2011, a new tax law increased the corporate tax rate from 30% to 40%.Raymond should record this change by debiting

Question

Quizplus · Accepted Answer

This is because the increase in tax rate from 30% to 40% will result in a higher deferred tax liability. Therefore, the company will need to record an additional expense of $30,000 ($300,000 temporary difference x 10% increase in tax rate) in the Income Tax Expense account.

At December 31, 2010 Raymond Corporation Reported a Deferred Tax