Answer:
The solution to the given problem is done below.
Explanation:
(a) Depreciation
for Financial Depreciation for Temporary
Year Reporting Purposes Tax Purposes Difference
2017 $160,000 $264,000 (104,000)
2018 $160,000 $360,000 (200,000)
2019 $160,000 $120,000 40,000
2020 $160,000 $56,000 104,000
2021 $160,000 0 $160,000
$800,000 $800,000 0
(b) 2018 2019 2020 2021 Total
Future taxable
amounts:
Depreciation $(200,000) $40,000 104,000 $160,000 $104,000
Deferred tax liability: $104,000 × 40% = $41,600 at the end of 2017.
