Use the Information Below to Answer the Following Questions -If the Rate of Income Tax Were Raised to 40%,what

question 9

Multiple Choice

Use the information below to answer the following questions. Each question is to be considered separately.
The income statement of Berrima Barbed Wire Ltd is:
$\begin{array}{lr} & \$ \\ \text { Revenue } & 22,000 \\ \text { Expense } & \underline{12,000} \\ \text { Profit before income tax } & 10,000 \\ \text { Income tax expense }(30 \%) & \underline{3,000} \\ \text { Net profit } & \underline{7,000}\end{array}$
-If the rate of income tax were raised to 40%,what would be the effect on net profit?

• A) It would increase by $700.
• B) It would decrease by $700.
• C) It would increase by $1000.
• D) It would decrease by $1000.

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Definitions:

Limited Supply

A situation where the availability of a product, resource, or commodity is not sufficient to satisfy the demand for it.

Limited Time

A situation or condition where there is a restricted duration available to complete a task or achieve an objective.

Fundamental Attribution Error

The tendency to overestimate the influence of personality and underestimate the influence of situations in judging others' behavior.

Experiment

A systematic and scientific procedure carried out to test a hypothesis by manipulating variables and observing the outcome.