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:

Opportunity Cost

Opportunity Cost is the value of the best alternative that is foregone when a particular decision is made.

Microchip

A small semiconductor device containing integrated circuits used in various electronic devices for processing, memory, or specific control functions.

Tire(s)

Rubber coverings placed on wheels of vehicles to provide traction and absorb shocks.

Gain From Trade

The benefits that parties obtain by exchanging goods or services through voluntary negotiation.