EGR Corporation has one asset worth $650,000.Accumulated Depreciation to date is $230,000 and accumulated CCA is $200,000.The Corporation also recorded warranty expense of $35,000.To date no customers have required warranty service,so no warranty expenditures have been made.Assuming the tax rate is constant at 40%,this will result in a:

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The difference between accounting depreciation ($230,000) and tax depreciation (CCA of $200,000) is $30,000. This creates a temporary difference, leading to a deferred tax asset of $30,000 * 40% = $12,000. The warranty expense of $35,000, which has not yet been deducted for tax purposes, creates another temporary difference, leading to a deferred tax asset of $35,000 * 40% = $14,000. The total deferred tax asset is $12,000 + $14,000 = $26,000.

EGR Corporation Has One Asset Worth $650,000