Deferred Tax (Appendix)

On January 1, 2010, Kunkel Corporation purchased an asset for $32,000. Assume that this is the only asset owned by the corporation. Kunkel has decided to use the straightline method to depreciate it. For tax purposes, it will be depreciated over three years.

It will be depreciated over fi ve years, however, for the fi nancial statements provided to stockholders. Assume that Kunkel Corporation is subject to a 40% tax rate.

Required Calculate the balance to be refl ected in the Deferred Tax account for Kunkel Corporation for each year 2010 through 2014.

Multi-Concept Exercises AppendixLO1