Mallow Inc., which has a 21% tax rate, purchased a new business asset. First-year book depreciation was $37,225, and first-year MACRS depreciation was $55,025. As a result of this book/tax difference, Mallow recorded a $3,738 deferred tax asset.

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The deferred tax asset should be calculated as the tax rate (21%) multiplied by the difference between MACRS and book depreciation ($55,025 - $37,225), which equals $3,738. However, this calculation actually results in a deferred tax liability, not an asset, because the tax depreciation is greater than the book depreciation.