a.Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment,which has a useful life of four years.Tax legislation requires the company to depreciate this type of equipment using the following schedule: year 1 - 50%,year 2 - 30%,year 3 - 15% and year 4 - 5%.In 2011 Plaxo purchases a piece of equipment with a four-year life and an original cost of $100,000.Discuss how this transaction will affect Plaxo's income taxes in 2011.
b.Assuming that Plaxo Corporation decides to use accelerated depreciation for both financial and tax reporting purposes for 2011,would there still be a deferred tax liability?

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The Answer of a.Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment,which has a useful life of four years.Tax legislation requires the company to depreciate this type of equipment using the following schedule: year 1 - 50%,year 2 - 30%,year 3 - 15% and year 4 - 5%.In 2011 Plaxo purchases a piece of equipment with a four-year life and an original cost of $100,000.Discuss how this transaction will affect Plaxo's income taxes in 2011.
b.Assuming that Plaxo Corporation decides to use accelerated depreciation for both financial and tax reporting purposes for 2011,would there still be a deferred tax liability?

APlaxo Corporation Has a Tax Rate of 35% and Uses