Reference no: EM131704876

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.