At the beginning of 2012, Baker, Inc. had a deferred tax asset of $8,000 and a deferred tax liability of $12,000. Pre-tax accounting income for 2012 was $600,000 and the enacted tax rate is 40%. The following are the only differences for tax and financial accounting purposes at the end of the year:
Interest income from municipal bonds $48,000
Accrued warranty costs, estmated to be paid in 2013 $104,000
Operating loss carryforward $76,000
Installment sales revenue, will be collected in 2013 $52,000
Prepaid rent expense, will be used in 2013 $24,000
Which of the following is required to adjust Baker, Inc.'s deferred tax liability to its correct balance at December 31, 2012?
a) $30,400 debit to Deferred Tax Liability
b) $30,400 credit to Deferred Tax Liability
c) $18,400 debit to Deferred Tax Liability
d) $18,400 credit to Deferred Tax Liability