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Monty Inc.’s only temporary difference at the beginning and end of 2019 is caused by a...

Monty Inc.’s only temporary difference at the beginning and end of 2019 is caused by a $3,450,000 deferred gain for tax purposes for an installment sale of a plant asset, and the related receivable (only one-half of which is classified as a current asset) is due in equal installments in 2020 and 2021. The related deferred tax liability at the beginning of the year is $1,380,000. In the third quarter of 2019, a new tax rate of 20% is enacted into law and is scheduled to become effective for 2021. Taxable income for 2019 is $5,750,000, and taxable income is expected in all future years.

1. Prepare the journal entry necessary to adjust the deferred tax liability when the new tax rate is enacted into law.

2. Draft the income tax expense portion of the income statement for 2019. Begin with the line “Income before income taxes.” Assume no permanent differences exist

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