Asked by Chloe Guida on Jun 17, 2024
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At December 31,2015,the Floyd Company reported a $29,600 deferred tax asset pertaining to a $80,000 temporary difference which will reverse equally during the next four years;Floyd also reported a $7,400 deferred tax liability pertaining to a $20,000 temporary difference which will reverse during 2016.After determining the deferred tax asset and liability on December 31,2015,Floyd's management was informed that the income tax rate for years subsequent to 2015 had been changed to 35%.As a result of the tax rate change,Floyd's 2015 income tax expense will
A) increase $1,200.
B) decrease $1,200.
C) decrease $444.
D) increase $444.
Deferred Tax Asset
An item on a company’s balance sheet that represents the difference in timing between when a tax is accrued and when it is paid, potentially reducing future tax liability.
Tax Rate Change
An alteration in the percentage at which an individual or corporation is taxed, which can affect financial planning and net income.
Temporary Difference
A difference between the carrying amount of an asset or liability in the balance sheet and its tax base that will result in taxable or deductible amounts in future years.
- Identify how changes in tax laws affect income tax expense and the valuation of deferred tax assets and liabilities.
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Learning Objectives
- Identify how changes in tax laws affect income tax expense and the valuation of deferred tax assets and liabilities.
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