2012 was the first year of operations for KO Corporation. KOs earnings before taxes for financial reporting purposes were $260,000 and $296,000 for 2012 and 2013, respectively. Interest income of $10,000 on a tax-free investment was earned in both years. Depreciation expense is taken on equipment purchased on January 1, 2012 having an original cost of $252,000, a 9-year life and a zero salvage value. Depreciation for tax purposes is computed using MACRS for which the rate is 20% for 2012 and 32% for 2013. Depreciation is calculated using the straight-line method for book purposes. The deferred tax asset/liability account has a $7,840 CREDIT balance as of January 1, 2013. The enacted tax rates for 2012 and 2013 are 35% and 40%, respectively.