Windsor Company Has Net Temporary Differences Between Tax and Book

question 24

Multiple Choice

Windsor Company has net temporary differences between tax and book accounting of $80 million, resulting in a deferred tax liability of $28 million. An increase in the tax rate would have the following impact on deferred taxes and net income: $$\begin{array} { l c c } & \text { Deferred Taxes } & \text { Net Income } \\\text { A) } & \text { Increase } & \text { No effect } \\\text { B) } & \text { Increase } & \text { Decrease } \\\text { C) } & \text { No effect } & \text { No effect } \\\text { D) } & \text { Decrease } & \text { No effect }\end{array}$$

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Simple Contract

An agreement made between parties that does not necessarily have to be in writing but is binding and enforceable by law.

Bailment

The transfer of personal property by its owner to another person with the understanding that the property will be returned to the owner in the future.

Right to Possess

The legal right of an individual or entity to have control over a property or item.

Incidental Services

Additional services that are not the primary focus of a contract but are provided as a minor or secondary aspect of it.