D. Calculate income tax expense, income taxes payable, deferred tax assets, and deferred tax liabilities, and calculate and interpret the adjustment to the financial statements related to changes in the income tax rate.

Question 1

Ex’s 235 - 238

Answer 1

To summarize, if taxable inc (on the tax return) is less than pretax inc (on the IS) and the diff. is expected to reverse in future years, a deferred tax liability is created. If taxable inc on the tax return is > than the pretax income on the IS and the diff. is expected to reverse in future years, a deferred tax asset is created.