Question 3

Randolf is interested in making his business more energy efficient. Comfy Home purchased and installed solar panels for $40,000 on January 1, 2016.

For book purposes, the solar panels are being depreciated straight-line over 10 years, with no salvage value. For tax purposes, the solar panels are using an accelerated depreciation method; the company deducts depreciation of $20,000 on its tax return in 2016.

The companys tax rate is 25%. In 2016, this transaction would lead to the creation of a:

[Select] [Select ] $4,000 $5,000 $10,000 $20,000 [ Select ] [Select] Deferred tax asset Deferred tax liability