Question

On January 1, 2013, Warfield Co. purchased a $600,000 machine, with a five-year useful life and no salvage value. The machine was depreciated by an accelerated method for book and tax purposes. The machine's carrying amount was $240,000 on December 31, 2014. On January 1, 2015, Warfield changed the depreciation method prospectively to the straight-line method for financial-statement purposes. Warfield can justify the change. Warfield's income tax rate is 30%. On December 31, 2015, what amount should Warfield report as deferred income tax

Answer 1

Answer:

$0

Explanation:

In the case when the depreciation method is changed so it should be treated propectively. The past year depreciation amount remains the same. So the starting year of change having no difference should be produced but the beginning to the closing year of change the deferred tax liability should be recorded the difference occured in the future that lies between the book and tax depreciation

So, it should be zero