Company A had depreciation of $14,000 and CCA of $12,500 during its first year of operations.The tax rates for Years 1 and 2 were 25% and 20% respectively.The Year 2 tax rate was enacted in Year 1.At the end of year 1,this will result in:

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Quizplus · Accepted Answer

The deferred income tax asset is calculated as the difference between the depreciation expense and the CCA expense, multiplied by the tax rate. In this case, the deferred income tax asset is $14,000 - $12,500 = $1,500. However, since the tax rate decreased from 25% to 20% in Year 2, the deferred income tax asset is reduced by $1,500 x (25% - 20%) = $300. Therefore, the deferred income tax asset at the end of Year 1 is $1,500 - $300 = $300.

Company a Had Depreciation of $14,000 and CCA of $12,500