Redtop Co.purchased a piece of equipment last year for $300,000.Management estimates that the equipment will have a useful life of five years and no salvage value.The depreciation expense recorded for tax purposes will be $72,000 this year (Year 2).The company uses the straight-line method of depreciation for reporting purposes.
a.Calculate the amount of depreciation expense for reporting purposes this year (Year 2).
b.What will be the net book value of the equipment reported on the balance sheet at the end of this year (Year 2)?
c.Will a deferred tax asset or liability be created as a result of the depreciation recorded for tax and financial reporting purposes?
d.What amount will be added to the deferred tax account as a result of the depreciation timing difference?

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The Answer of Redtop Co.purchased a piece of equipment last year for $300,000.Management estimates that the equipment will have a useful life of five years and no salvage value.The depreciation expense recorded for tax purposes will be $72,000 this year (Year 2).The company uses the straight-line method of depreciation for reporting purposes.
a.Calculate the amount of depreciation expense for reporting purposes this year (Year 2).
b.What will be the net book value of the equipment reported on the balance sheet at the end of this year (Year 2)?
c.Will a deferred tax asset or liability be created as a result of the depreciation recorded for tax and financial reporting purposes?
d.What amount will be added to the deferred tax account as a result of the depreciation timing difference?

Redtop CoPurchased a Piece of Equipment Last Year for $300,000