Question

Determine the effect of the change and prepare the appropriate journal entry to record Bronson's income tax expense in 2013. What adjustment, if any, is needed to revise retained earnings as a result of the change?

Option 1:
Debit: Income Tax Expense $6 million
Credit: Deferred Tax Liability $6 million

Option 2:
Debit: Income Tax Expense $2 million
Credit: Deferred Tax Liability $2 million

Option 3:
Debit: Income Tax Expense $8 million
Credit: Deferred Tax Liability $8 million

Option 4:
Debit: Income Tax Expense $4 million
Credit: Deferred Tax Liability $4 million

Answer 1

Option 1: Debit: Income Tax Expense $6 million and Credit: Deferred Tax Liability $6 million. Retained earnings would decrease by $6 million.

Step-by-step explanation:

The appropriate journal entry to record Bronson's income tax expense in 2013 would be Option 1: Debit: Income Tax Expense $6 million and Credit: Deferred Tax Liability $6 million. This journal entry reflects the recognition of income tax expense and the corresponding increase in the deferred tax liability.

Retained earnings would need to be revised to account for this change. Since the income tax expense is $6 million, retained earnings would decrease by $6 million.