Assume a company originally paid $400,000 for an asset threee years ago. The assey has a ten-year life and zero salvage value at the end of the ten years. During the past three years the company deducted depreciation on this asset for income tax purposes according to the MACRS depreciation schedule using the half-year convention from Exhibit 3.13. It uses straight line depreciation for financial reporting purposes. In the past the company had $100000 of taxable income and book incomeÂ before deducting depreciation expenseÂ and it expects to have that same incomeÂ for the foreseeable future. The company has a 40% income tax rate. CalculateÂ the following for yearÂ 4 the amount of taxÂ the company will pay the depreciation expense and cummulativeÂ depreciation expensed for tax and book purposes the income tax expense shown on the income statement the net incomeÂ shown on the incomeÂ statement and the balance in its deferred tax asset and liability accounts.
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