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Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts...

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Accounting

Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences.

Situation 1 2
Taxable income $40,000 $80,000
Amounts at year-end:
Future deductible amounts 5,000 10,000
Future taxable amounts 0 5,000
Balances at beginning of year:
Deferred tax asset 1,000 4,000
Deferred tax liability 0 1,000

The enacted tax rate is 25% for both situations. Determine the changein the deferred tax asset balance for the year.

Situation 1 Situation 2

a.$5,000$10,000

b.$250$1,500

c.$1,250$2,500

d.$0$0

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