At the end of Year 1, Pueblo Inc. has one temporary difference of $150,000 due...
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Accounting
At the end of Year 1, Pueblo Inc. has one temporary difference of $150,000 due to a GAAP accrual for a contingent liability with a tax basis of zero. Any resulting deferred tax amounts are based on a current tax rate of 21%. However, on December 30, Year 1, a new tax rate of 30% was enacted into law, effective for the following year and beyond.
After taking into account the change in the enacted tax rate:
a.
Income tax expense will increase by $31,500 in Year 1.
b.
Income tax expense will decrease by $31,500 on January 1, Year 2.
c.
Income tax expense will decrease by $13,500 in Year 1.
d.
Income tax expense will decrease by $13,500 on January 1, Year 2.
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