Question

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

1) it is probable that a future tax rate change will occur.
2) it appears likely that a future tax rate will be greater than the current tax rate.
3) the future tax rates have been enacted into law.
4) it appears likely that a future tax rate will be less than the current tax rate.

Answer 1

Deferred income tax is calculated using the current tax rate, but future tax rate changes can affect the calculation. If it is probable that a future tax rate change will occur, or it appears likely that a future tax rate will be less than the current tax rate, other tax rates may be used to calculate the deferred income tax amount.

Step-by-step explanation:

Deferred income tax is the tax expense or benefit that arises when a company's taxable income differs from its financial income, and it is calculated using the current tax rate. However, if it is probable that a future tax rate change

will occur, or it appears likely that a future tax rate will be less than the current tax rate, then other tax rates may be used to calculate the deferred income tax amount on the balance sheet. The change in tax rates can affect the amount of taxes owed by the company.