Question

Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if

a. it is probable that a future tax rate change will occur.
b. it appears likely that a future tax rate will be greater than the current tax rate.
c. the future tax rates have been enacted into law.
d. it appears likely that a future tax rate will be less than the current tax rate.

Answer 1

Alternative tax rates for deferred income tax calculations can be used when such future tax rates have been legally enacted.

Step-by-step explanation:

The student has posed a question concerning the circumstances under which alternative tax rates may be used to calculate the deferred income tax amount on the balance sheet. The correct answer is c. the future tax rates have been enacted into law. This is in alignment with accounting principles that mandate the use of enacted tax rates when preparing financial statements. Using rates that are only likely or probable would introduce speculation, which is not suitable for financial reporting purposes.