When a Change in the Tax Rate Is Enacted into Law

question 57

Multiple Choice

When a change in the tax rate is enacted into law, its effect on existing deferred income tax accounts should be

• A)handled retroactively in accordance with the guidance related to changes in accounting standards.
• B)considered, but it should only be recorded in the accounts if it reduces a deferred tax liability or increases a deferred tax asset.
• C)reported as an adjustment to tax expense in the period of change.
• D)applied to all temporary or permanent differences that arise prior to the date of the enactment of the tax rate change, but not subsequent to the date of the change.

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Definitions:

Price of Labor

Price of Labor refers to the wages or salary paid to workers for their labor or services.

Price of Capital

The expense involved in using capital goods, often involving interest rates or rental costs for financial or physical capital.

Perfectly Competitive Market

A theoretical market structure characterized by a large number of buyers and sellers, homogeneous products, and no barriers to entry or exit, leading to price takers rather than price makers.

Market Price

The present cost at which a service or asset is available for purchase or sale in the marketplace.