Changing Tax Rates
Goshute Company computed pretax financial income of $50,000 for the year ended December 31, 2008. Taxable income for the year was $15,000. Accumulated temporary differences as of December 31, 2007, were $120,000. A deferred tax liability of $48,000 was included on the December 31, 2007, balance sheet. Accumulated temporary differences as of December 31, 2008, are $155,000. The differences are related to noncurrent items.
1. Prepare the journal entries necessary to record income tax for 2008. The enacted income tax rate is assumed to be 40% for 2008 and future years.
2. On January 1, 2009, the income tax rate is changed to 32% for 2009 and all future years. Prepare the necessary journal entry, if any.