1. At the end of Year 1, Pueblo Inc. has one temporary difference of $150,000 due to a GAAP accrual for a contingent liability with a tax basis of zero. Any resulting deferred tax amounts are based on a current tax rate of 21%. However, on December 30, Year 1, a new tax rate of 30% was enacted into law, effective for the following year and beyond.

   After taking into account the change in the enacted tax rate:

   	a.	Income tax expense will increase by $31,500 in Year 1.
   	b.	Income tax expense will decrease by $31,500 on January 1, Year 2.
   	c.	Income tax expense will decrease by $13,500 in Year 1.
   	d.	Income tax expense will decrease by $13,500 on January 1, Year 2.