The new CEO of Efficacious, Inc. is trying to familiarize herself with the company's financials and has asked you to explain the seemingly erratic pattern of income tax rates and deferred taxes. As CFO, you enlist the assistance of a member of your staff to create a Tableau Dashboard depicting trends in tax expense, tax rates, and deferred taxes for the most recent ten years. You plan to use the Dashboard to help the CEO visualize your explanation. Deferred Income Taxes Deferred income tax assets III Deferred income tax liabilities 7M Net deferred tax asset (liab.) 6M 6M 5M SM 4M 4M 3M 3M Deferred Income Tax Assets & Liabilities ili 2M Net deferred tax asset (liab.) H 2M 1M IM OM OM -1M -1M -2M -2M 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Effective Tax rate Composition of Income Before Income Taxes 30M Income tax expense Net income 35.0% 25M 30.0% 25.0% 20M 20.0% Net Income & Income Tax Expense 15M Effective Tax rate 15.0% 10M 10.0% 5M 5.0% OM 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 # tableau T O Download Drawing from the data, assess the following: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How would you explain the significant decline in the effective tax rate beginning in 2018? A new tax law effective at the beginning of 2018 decreased the corporate tax rate in the U.S. from 35% to 21%. The company's net income has grown more rapidly than income tax expense. Deferred tax assets began to decline while deferred tax liabilities were decreasing. Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 What was the effective tax rate in 2018? 20.1%. Higher than the year before. 25.8%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 How would you explain the primary reason that the effective tax rate in 2018 did not decline to the levels of 2019 and later? Deferred tax liabilities were less than deferred tax assets after remeasurement pursuant to the 2018 statutory tax rate reduction. Deferred tax assets were higher than deferred tax liabilities after remeasurement pursuant to the 2018 statutory tax rate reduction. It took time for tax expense to adjust to the new tax law. Required 3 Required 5 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 What is the likely reason that income tax expense in 2018 was higher than in 2019 although income before taxes was higher in 2019 Income tax expense is higher when income before taxes is lower. The company debited Income tax expense and credited Deferred tax assets after remeasuring the liability due to the 2018 tax rate reduction. OThe company debited Income tax expense and credited Deferred tax liabilities after remeasuring the liability due to the 2018 tax rate reduction. Required 4 Required 5