Bronson Industries reported a deferred tax liability of $8 million for the year ended December 31, 2017, related to a temporary
difference of $20 million. The tax rate was 40%. The temporary difference is expected to reverse in 2019 at which time the deferred tax liability will become payable. There are no other temporary differences in 2017–2019. Assume a new tax law is enacted in 2018 that causes the tax rate to change from 40% to 30% beginning in 2019. (The rate remains 40% for 2018 taxes.) Taxable income in 2018 is $30 million. Required: 1. & 2. Determine the type of accounting change and prepare the appropriate journal entry to record Bronson's income tax expense in 2018 and adjustment, if any, is needed to revise retained earnings as a result of the change.
1 answer:
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Answer:
The investor will pay up the rereofitted pumps in a period of 22.52 months.
Explanation:
<em><u>First,</u></em> we solve for the amount of profit generate per month:
21,000 gallons a month x $0.09 per gallon = $1,890
Now, we calcualte the time at which an monthly income of 1890 discounted at 2% per month matches a present value of 34,000
C $1,890.00
time n
rate 0.02
PV $34,000.0000
We use logarithmics properties to solve for n:
-22.52006579
n = 22.5200 = 22 and a half month.