On 1 April 2013, the company rate of income tax was changed from 35% to 30%. At the previous reporting date (30 June 2012) Montgomery Limited had the following tax balances:
Deferred tax assets $26 250
Deferred tax liabilities $21 000
What is the impact of the tax rate change on income tax expense?

Question

Quizplus · Accepted Answer

The deferred tax asset will increase by $5,250 (26,250 x (35% - 30%)). The deferred tax liability will decrease by $3,750 (21,000 x (35% - 30%)). The net impact on income tax expense will be an increase of $1,500 ($5,250 - $3,750).

On 1 April 2013, the Company Rate of Income Tax