Deferral of Taxes and Reversal of Temporary Differences Castillo Company bought an asset for $200,000 on January 1, 20X0. The asset has a 10-year life and zero salvage value. Castillo uses straight-line depreciation for financial reporting purposes and DDB depreciation for tax purposes. The DDB schedule switches to straight-line depreciation for the remaining book value when the resulting straight-line depreciation exceeds the amount of deprecia- tion on the original DDB schedule. This results in the following depreciation charges: Straight-line Year Depreciation DDB Depreciation 20x0 $20,000 $40,000 20X1 20,000 32,000 20x2 20,000 25,600 20X3 20,000 20,480 20X4 20,000 16,384 20X5 20,000 13,107 20X6 20,000 13,107 20X7 20,000 13,107 20x8 20,000 13,107 20X9 20,000 13,107 The company's tax rate is 40%. 1. Compute the amount in the deferred tax account at the end of each year. 2. Is the deferred tax account an asset or a liability? Explain. 3. What is the amount in the deferred tax account at the end of the life of the asset? Explain what caused the deferred tax account to reach this value at the end of the asset's life.