When Tax Rates Are Changed Subsequent to the Creation of a Deferred

question 156

Multiple Choice

When tax rates are changed subsequent to the creation of a deferred tax asset or liability, GAAP requires that:

• A) All deferred tax accounts be adjusted to reflect the new tax rates.
• B) The beginning deferred tax accounts are left unchanged.
• C) Only the current deferred tax accounts are adjusted to reflect the new tax rates.
• D) Only the noncurrent deferred tax accounts are adjusted to reflect the new tax rates.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated at the beginning of the period.

Selling Price

The amount of money charged for a product or service, determined by factors such as cost, market demand, and competition.

Unit Product Costs

Unit product costs are the total expenses incurred in producing a single unit of product, including direct materials, direct labor, and manufacturing overhead, crucial for pricing and profitability analyses.

Markup

The difference between the cost of a good or service and its selling price, expressed as a percentage of the cost.