Tommy Corp

question 89

Multiple Choice

Tommy Corp.reported a net deferred tax asset balance of $185,000 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 $500,000.The enacted statutory tax rate related to this balance changed from 37% to 32%,effective immediately.By what amount will the deferred asset balance change?

• A)increase by $31,500
• B)decrease by $25,000
• C)increase by $25,000
• D)decrease by $31,500

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Definitions:

Construction Lien

A claim made against a property by a contractor or subcontractor who has not been paid for work performed or materials supplied.

Building Contract

A legally binding agreement between a property owner and a contractor for the construction or renovation of a building, detailing the work to be done, materials, costs, and timeframes.

Hold Back

The act of withholding part of a payment or benefit until certain conditions are met or to exert control or influence over a situation.