Under the accrual method,what is the effect of the tax rate change in F2015? $$\begin{array} { | l | r | r | }
\hline & \text { F2014 } & \text { F2015 } \
\hline \text { Deferred tax liability } & 27,500 & \
\hline \text { Revenue } & & 150,000 \
\hline \text { Taxable income } & & 105,000 \
\hline \text { Tax rate } & 25 \% & 35 \% \
\hline
\end{array}$$

Question

Under the accrual method,what is the effect of the tax rate change in F2015? $$\begin{array} { | l | r | r | } 
\hline & \text { F2014 } & \text { F2015 } \
\hline \text { Deferred tax liability } & 27,500 & \
\hline \text { Revenue } & & 150,000 \
\hline \text { Taxable income } & & 105,000 \
\hline \text { Tax rate } & 25 \% & 35 \% \
\hline
\end{array}$$

Quizplus · Accepted Answer

The increase in the tax rate from 25% to 35% will result in an increase in the deferred tax liability. The amount of the increase is equal to the difference between the old and new tax rates multiplied by the taxable income. In this case, the increase is equal to (35% - 25%) x $105,000 = $11,000.

Under the Accrual Method,what Is the Effect of the Tax