on 31st december 2010 the south padre company had

Question

On 31^st December, 2010 the south Padre Company had a deferred tax liability balance of $8100 starting from an excess of MACRS depreciation for tax purpose over straight line depreciation for accounting purposes. The tax effects of that timing difference are expected to reverse in the subsequent years:

Year            timing difference        enacted tax rate           Deferred tax liability

2011                   6000                         30%                                1800

2012                    8000                        35%                                2800

2013                    10000                       35%                                3500

8100

On 27^th January, 2011, Congress raised effective income tax rate to 38 percent for all future years, including the existing year, 2011.

Required:

Prepare the entry record any adjustments required due to the income tax rate increase on 27^th January, 2011.