Question :

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

1. Year    Taxable Income

2012           $500,000

2013             360,000

2014             400,000

2. On January 2, 2012, heavy equipment costing $600,000 was purchased. The equipment had a life of 5 years and no salvage value. The straight-line technique of depreciation is used for book purposes and the tax depreciation taken each year is listed given:

Tax Depreciation

2012                       2013                     2014                 2015                  Total

$198,000              $270,000              $90,000                $42,000 $600,000

3. On January 2, 2013, $270,000 was collected in advance for rental of a building for a three-year period. The whole $270,000 was reported as taxable income in 2013, but $180,000 of the $240,000 was reported as unearned revenue at December 31, 2013 for book purposes.

4. The enacted tax rates are 40% for every year.

Required:

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

(b) Evaluate the deferred tax asset or liability at the end of 2012.

(c) Purpose a schedule of future taxable and deductible amounts at the end of 2013.

(d) Purpose a schedule of the deferred tax asset and liability at the end of 2013.