The following information is available for the first three years of operations for Cooper Company:

1. Year Taxable Income

2017 $500,000

2018 375,000

2019 400,000

2. On January 2, 2017, heavy equipment costing $800,000 was purchased. The equipment had a life of 5 years and no salvage value. The straight-line method of depreciation is used for book purposes and the tax depreciation taken each year is listed below:

Tax Depreciation

2017 2018 2019 2020 Total

$264,000 $360,000 $120,000 $56,000 $800,000

3. The enacted tax rates are 40% for all years.

Instructions

(a) Prepare a schedule comparing depreciation for financial reporting and tax purposes.

(b) Determine the deferred tax (asset) or liability at the end of 2017.