Piper, Inc B) C) D)

question 68

Multiple Choice

Piper, Inc. reported a net deferred tax asset balance of $166,650 resulting from an estimated warranty expense accrual for book purposes. The total book-tax difference related to the bases of the estimated warranty liability is $505,000. The enacted statutory tax rate related to this balance changed from 33% to 28%, effective immediately. What journal entry will Piper need to make to adjust for this change in tax rates?

• A) \[\begin{array} { | c | r | r | }
• \hline \text { Deferred Tax Asset } & 46,662 & \\
• \hline \text { Income Tax Payable } & & 46,662 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | r | r | }
• \hline \text { Income Tax Expense } & 46,662 & \\
• \hline \text { Deferred Tax Asset } & & 46,662 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | r | r | }
• \hline \text { Income Tax Expense } & 25,250 & \\
• \hline \text { Deferred Tax Asset } & & 25,250 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | r | r | }
• \hline \text { Deferred Tax Asset } & 25,250 & \\
• \hline \text { Income Tax Payable } & & 25,250 \\
• \hline
• \end{array}\]

---

Definitions:

Tax on Consumption

A levy placed on the spending on goods and services, often implemented through sales tax or value-added tax (VAT).

Standard of Living

The level of wealth, comfort, material goods, and necessities available to a certain socioeconomic class or geographic area.

Saving

The process of setting aside a portion of current income for future use, either by depositing money in a bank or purchasing financial instruments.

Benefits-Received Principle

A theory of fairness holding that taxpayers should contribute to government (in the form of taxes) in proportion to the benefits they receive from public expenditures.