Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its
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Question:
Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment, which has a useful life of four years. Tax legislation requires the company to depreciate its equipment using the following schedule: year 1- 50%, year 2 - 30%, year 3 - 15% and year 4 - 5%. In 2014 Plaxo purchases a piece of equipment with a four year life and an original cost of $100,000. What amount will Plaxo record as a deferred tax asset or liability in 2010?
a. | Deferred tax asset of $25,000. |
b. | Deferred tax liability of $25,000. |
c. | Deferred tax asset of $8,750. |
d. | Deferred tax liability of $8,750. |
ANSwer D but why??
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