If a Tax Rate Changes from 30 Per Cent to 25

question 39

Multiple Choice

If a tax rate changes from 30 per cent to 25 per cent results in an adjustment to the Deferred Tax Liability account of $50,000,what is (a) the amount of the temporary differences; and (b) the type of temporary differences?

• A) (a) $ 1,000,000; (b) Taxable temporary differences.
• B) (a) $ 1,000,000; (b) Deductible temporary differences.
• C) (a) $ 50,000; (b) Taxable temporary differences.
• D) (a) $ 50,000; (b) Deductible temporary differences.
• E) Cannot determine from the information given.

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Definitions:

Balance Sheet

A statement that displays the financial standing of a company, including what it owns, owes, and the value held by investors, at a given time.

Owner's Equity

The residual interest in the assets of a business after deducting its liabilities; represents the ownership interest of shareholders or owners.

Assets

Resources owned or controlled by a business that are expected to bring future economic benefits.

Accrual Basis

An accounting method where transactions are recorded when they occur, regardless of when cash is exchanged, focusing on economic events rather than cash flow.