Coco Ltd. purchased an equipment last year for $300,000. At that time, the Management estimated that the equipment will have a useful life of five years with no salvage value at its end of life. The depreciation expense recorded for tax purposes is $72,000 this year (Year 2). Assume that the company uses the straight-line method of depreciation for reporting purposes.

a. Determine the amount of depreciation expense for reporting purposes this year (Year 2). (4 marks)

b. Determine the net book value of the equipment reported on the balance sheet at the end of this year (Year 2). (4 marks)

c. Is there a deferred tax asset or liability created as a result of the depreciation recorded for tax and financial reporting purposes? (3 marks)

d. Determine the amount that will be added to the deferred tax account arising from the result of the depreciation timing difference. (4 marks)