In its first year, Firm KZ recognized $427,300 ordinary business income and a $13,590 loss on the sale of an investment asset. In its second year, Firm KZ recognized $500,800 ordinary business income, a $19,300 Section 1231 gain, and a $7,400 Section 1231 loss on two sales of operating assets.

1. Compute KZs book and taxable income for its first year.
2. Using a 21 percent tax rate, compute KZs deferred tax asset or liability (identify which) on its balance sheet on the last day of the year.
3. Compute KZs book and taxable income for its second year.
4. Compute KZs deferred tax asset or liability (identify which) on its balance sheet on the last day of the second year.

a.	Book income
	Tax income
b.	Deferred tax asset

c.	Book income	$512,700
	Tax income	$500,800
d.	Deferred tax asset