On 1 November 2024, the company rate of income tax was changed from 35% to 30%. At the previous reporting date (30 June 2024) Sanders Limited had the following tax balances:Deferred tax assets $33 500Deferred tax liabilities $18 000What is the impact of the tax rate change on income tax expense?Group of answer choicesIncrease $2 214.Decrease $2 214.Increase $2 583.Decrease $2 583.

The impact of the tax rate change on income tax expense can be calculated as follows:

First, calculate the difference in tax rate, which is 35% - 30% = 5%.

Next, apply this difference to the deferred tax assets and liabilities.

For deferred tax assets: $33,500 * 5$1,675 For deferred tax liabilities: $18,000 * 5$900

Subtract the change in deferred tax liabilities from the change in deferred tax assets to find the overall impact on income tax expense: $1,675 -$900 = $775

Therefore, the income tax expense will decrease by $775 due to the change in tax rate. However, none of the provided answer choices match this calculation. Please check the numbers and try again.

The impact of the tax rate change on income tax expense can be calculated as follows:

First, calculate the net deferred tax asset as of 30 June 2024:

Deferred tax assets - Deferred tax liabilities = Net deferred tax asset $33,500 -$18,000 = $15,500

Next, calculate the impact of the tax rate change on the net deferred tax asset:

Old tax rate * Net deferred tax asset = Old tax expense 35% * $15,500 =$5,425

New tax rate * Net deferred tax asset = New tax expense 30% * $15,500 =$4,650

Finally, calculate the impact of the tax rate change on income tax expense:

Old tax expense - New tax expense = Impact on income tax expense $5,425 -$4,650 = $775

Therefore, the impact of the tax rate change on income tax expense is a decrease of $775. However, none of the provided answer choices match this calculation.