Snifful Industries Has a Depreciable Asset That Is Estimated for Accounting

question 1

Multiple Choice

Snifful Industries has a depreciable asset that is estimated for accounting purposes to have a useful life of 7 years.For taxation purposes the useful life is 3 years.The asset was purchased at the beginning of year 1,there is no residual value,and the straight-line method of depreciation is used for both tax and accounting purposes.The tax rate is 30 per cent and the cost of the asset is $210,000.What is the amount of the deferred tax liability account generated by this asset at the end of years 2,3 and 4?

• A) End of year 2: $24,000; Year 3: $36,000; Year 4: $27,000
• B) End of year 2: $80,000; Year 3: $120,000; Year 4: $90,000
• C) End of year 2: $12,000; Year 3: $24,000; Year 4: $36,000
• D) End of year 2: $12,000; Year 3: $12,000; Year 4: $(9,000)
• E) None of the given answers.

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