DEFERRED TAX JUSTIFICATION Com pany for years x1-x5 reports income before depreciation and income tax of $100,000. The only difference between book and tax income is depreciation on a fixed asset acquired 1/1/x1 for $100,000. The asset is depreciated straight-line over 5 years for book purposes and is a 3-year MACRS asset for tax purposes. Assume a tax rate of 20% for all periods Depreciation for x1-x5 is as follows: X1 X2 X3 X4 X5 Book $20,000 $20,000 $20,000 $20,000 $20,000 Tax $33,330 $44,450 $14,810 410 Book Income before tax X1 X2 X3 X4 x5 Inc blf depr 100000 100000 100000 100000 100000 20000 20000 20000 20000 20000 Inc blf /T 80000 80000 80000 80000 80000 Taxable Income Inc b/f depr 100000 100000 100000 100000 100000 Tax X1 X2 X3 X4 Depr. 33330 44450 14810 7410 66670 55550 85190 92590 100000 Focus Page 5 of 7 100%