Using the facts of Problem 10, determine the following.
a. The 2017 end-of-year balance in Prance’s deferred tax asset and deferred tax liability balance sheet accounts.
b. The value to Prance of the accelerated tax deduction for depreciation, considering the time value of money. Prance earns an after-tax rate of return on capital of 8%?
Facts of Problem 10
Prance, in Problem 3, reports $600,000 of pretax book net income in 2017. Prance’s book depreciation exceeds tax depreciation that year by $20,000. Prance reports no other temporary or permanent book-tax differences. Assume that the pertinent U.S. tax rate is 35%,