Burke & Company, Inc., a calendar year C-corp that issues audited financial statements, acquired a major piece of production equipment this year at a total cost of $5,200,000. For financial statement purposes, the production equipment will have a salvage value of $200,000, and will depreciate on a straight-line basis over a 10 year life. On Burke & Companys tax return, the asset will have no salvage value and will be depreciated using MACRS accelerated depreciation rates over 7 years. Assume no election is made to claim 179 or additional first year depreciation and that the applicable tax depreciation rate for 7 year assets in the first year of use is 0.1429. Further assume there are no other book tax differences in the current or any prior year.

a. Will the tax adjustment account on Burke & Companys financial statement be a Deferred Tax Asset (debit) or Deferent Tax Liability (credit)?

b.Assuming the applicable federal tax rate is 21%, calculate the Deferred Tax Asset or Deferred Tax Liability balance as of the last day of the year?