On January 1, 2014, Hart Company purchased an asset for $137,500. For financial accounting purposes, the asset will be depreciated on a straight-line basis over five years with no residual value at the end of that time. For tax purposes, the asset will be depreciated as follows: 2014, $45,000; 2015, $35,000; 2016, $25,000; 2017, $20,000; and 2018, $12,500. Assume that the company is subject to a 35% tax rate.
REQUIRED:
1. What is the amount of deferred tax at December 31, 2014?
2. Does the deferred tax represent an asset or a liability?
3. What is the amount of deferred tax at December 31, 2018?

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The Answer of On January 1, 2014, Hart Company purchased an asset for $137,500. For financial accounting purposes, the asset will be depreciated on a straight-line basis over five years with no residual value at the end of that time. For tax purposes, the asset will be depreciated as follows: 2014, $45,000; 2015, $35,000; 2016, $25,000; 2017, $20,000; and 2018, $12,500. Assume that the company is subject to a 35% tax rate.
REQUIRED:
1. What is the amount of deferred tax at December 31, 2014?
2. Does the deferred tax represent an asset or a liability?
3. What is the amount of deferred tax at December 31, 2018?

On January 1, 2014, Hart Company Purchased an Asset for $137,500