40) Infinity Production acquired a new machine at the beginning of the current year. The machine cost $720,000 with no residual value expected. Infinity uses the straight-line method for financial reporting, assuming a 6-year useful life. The firm classifies the equipment as 5-year MACRS property for tax purposes using the following percentages.

Year MACRS (%)

1 20.00%

2 32.00

3 19.20

4 11.52

5 11.52

6 5.76

The company is subject to a 40% income tax rate and has no other book-tax differences. Income before depreciation and tax is presented below:

Year Income before Tax and Depreciation

1 $400,000

2 450,000

3 520,000

4 700,000

5 820,000

6 950,000

Complete the following table for Infinity Production.

Year Book depreciation Tax depreciation Book income before tax Taxable income before tax Income tax expense Deferred tax liability balance

1

2

3

4

5

6