Q1. 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?
a. Increase $750.
b. Decrease $750.
c. Increase $875.
d. Decrease $875.
Q2. D'Silva Limited has a product warranty liability amounting to $10000. The product warranty costs are not tax deductible until paid out to customers. The company tax rate is 30%. The company has:
a. a deductible temporary difference of $10 000
b. an taxable temporary difference of $10 000.
c. a tax base of $10 000.
d. a future deductible amount of $0.