Windsor Company has net temporary differences between tax and book accounting of $80 million, resulting in a deferred tax liability of $28 million. An increase in the tax rate would have the following impact on deferred taxes and net income: $$\begin{array} { l c c }
& \text { Deferred Taxes } & \text { Net Income } \
\text { A) } & \text { Increase } & \text { No effect } \
\text { B) } & \text { Increase } & \text { Decrease } \
\text { C) } & \text { No effect } & \text { No effect } \
\text { D) } & \text { Decrease } & \text { No effect }
\end{array}$$
A)Option A
B)Option B
C)Option C
D)Option D

Question

Windsor Company has net temporary differences between tax and book accounting of $80 million, resulting in a deferred tax liability of $28 million. An increase in the tax rate would have the following impact on deferred taxes and net income: $$\begin{array} { l c c } 
& \text { Deferred Taxes } & \text { Net Income } \
\text { A) } & \text { Increase } & \text { No effect } \
\text { B) } & \text { Increase } & \text { Decrease } \
\text { C) } & \text { No effect } & \text { No effect } \
\text { D) } & \text { Decrease } & \text { No effect }
\end{array}$$
A)Option A
B)Option B
C)Option C
D)Option D

Quizplus · Accepted Answer

An increase in the tax rate would increase the deferred tax liability and decrease net income.

Windsor Company Has Net Temporary Differences Between Tax and Book