On January $1$ of each of the first four years of its cxistence, Allway Company purchases a ncw unit of cquipmenL. Fiach unit has a four$-$year life and zero salvage value, costs $$100,000,$ and is deprociatod for GAAP and tax purposes as shown below. The income tax rale is $25\%.$ Allway has a deferred tax linbility of $$12,500$ at the end of Year $3.$ The current year is Ycar $4,$ and pretax GiA AP income is $$30,000.$ Amounts are in thousands.

Exurcise $18-66$

Pecurding Mumple

Temporary Dilteraces,

Change in Enaclead Tax Rate Lo$1,5$

$\backslash$table$[[,$Prior Years,$\frac{\text{C}\text{u}\text{r}\text{r}\text{e}\text{n}\text{t}\text{Y}\text{e}\text{a}\text{r}}{4},$Future Years$],[,1,2,3,5,6,7],[$Equipment$,,,,,,,],[$Beginning balance,$$0,$$$100,$$$200,$$$300,,,],[$Purchases al January $1..........,100,100,100,100,,,],[$Retirements at December $31.....,0,0,0,(100),,,],[$Ending balance...,$$100,$$$200,$$$300,$$$300,,,]]$

continued

Chapter $18$ Inzame Taxes

Cambridge Business Publishers

continued from previous page

$\backslash$table$[[,$Prior Years,$\frac{\text{C}\text{u}\text{r}\text{r}\text{e}\text{n}\text{t}\text{Y}\text{e}\text{a}\text{r}}{4},$Future Years$],[1,2,3,5,6,7],[\backslash$table$[[$GAAP deprecia$],[$Equipment $1-],[$Equipment $2],[$Equipment $3-],[$Equipment $4.]],$$$25,\backslash$table$[[$$$25$