Which Is Correct Regarding the Effect of Tax Rate Changes

question 36

Multiple Choice

Which is correct regarding the effect of tax rate changes on income tax expense, assets and liabilities?

• A)When a company makes no sales and has no expenses such that its pre-tax income is zero, a change in tax rate always results in zero net income.
• B)Enterprises need to take account of changes in future tax rates legislation only if it has been passed into legislation and not if it is only considered "substantively enacted."
• C)When the tax rate decreases, the decrease in deferred tax liabilities creates a tax expense.
• D)When the tax rate increases, the increase in deferred tax liabilities creates tax expense.

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Definitions:

Two-Tailed

A statistical test where the critical area of a distribution is two-sided and tests whether a sample is either greater or less than a certain range of values.

Negative Number

A real number that is less than zero, indicating a direction opposite to positive numbers.

Null Hypothesis

A type of hypothesis used in statistics that proposes there is no statistical significance between two variables, or that a statement of no effect or no difference will be true.

Two-Tailed

In hypothesis testing, it refers to the methodology that considers both directions of a possible effect, allowing for investigation of deviations in two opposite directions from the null hypothesis.