Change in Tax Rates
Response to the following problem:
At the end of 2010, Rowet Company reported a deferred tax liability of $6,120 based on an income tax rate of 30%. On June 1, 2011 Congress changed the income tax rate to 35%.
Required
1. Calculate the amount of the adjustment to Rowet Company's 2010 year-end deferred tax liability.
2. Prepare the journal entry to correct Rowet Company's deferred tax liability.
Show all work and calculations.