At the beginning of 2015, Pitman Co. purchased an asset for $1,200,000 with an estimated useful life of 5 years and an estimated salvage value of $200,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.s tax rate is 40% for 2015 and all future years.

At the end of 2015, what are the book basis and the tax basis of the asset?

Book basis Tax basis

a. $1,000,000 $620,000

b. $980,000 $620,000

c. $980,000 $720,000

d. $1,000,000 $720,000

22. At the end of 2015, which of the following deferred tax accounts and balances is reported on Pitmans balance sheet?

Account _ Balance

a. Deferred tax asset $136,000

b. Deferred tax liability $136,000

c. Deferred tax asset $112,000

d. Deferred tax liability $112,000