Reference no: EM132866672
Problem - On January 1, 2016, Deng Company purchased an asset for $100,000. For financial accounting purposes, the asset will be depreciated on a straight-line basis over five years with no residual value at the end of that time. For tax purposes, the asset will be depreciated as follows: 2016, $40,000; 2017, $30,000; 2018, $20,000; 2019, $10,000; and 2020, $0. Assume that the company is subject to a 40% tax rate.
a. What is the amount of deferred tax at December 31, 2016?
b. Does the deferred tax represent an asset or a liability?
c. What is the amount of deferred tax at December 31, 2020?
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