Prance, Inc., earns pretax book net income of $800,000 in 2018.Prance acquires a depreciable asset in 2019, and first-year taxdepreciation exceeds book depreciation by $80,000.
In 2019, Prance reports $600,000 of pretax book net income, andthe book depreciation exceeds tax depreciation that year by$20,000. Prance reports no other temporary or permanent book-taxdifferences. The pertinent U.S. tax rate is 21%, and Prance earnsan after-tax rate of return on capital of 8%.
a. Enter below the 2019 end-of-year balance in Prance's deferredtax asset and deferred tax liability balance sheet accounts. If anamount is zero, enter "0".
| a. | Deferred tax asset account balance | $ |
| b. | Deferred tax liability account balance | $
|
b. The value to Prance of the accelerated taxdeduction for depreciation, considering the time value of money.Prance earns an after-tax rate of return on capital of 8% is0.9259.
$
