Determine whether the depreciation of the machine will lead

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Question - Assume that for a particular company, the only temporary difference for tax-effect accounting purposes relates to the depreciation of a newly acquired machine. The Machine was acquired on 1 July 2018 at the cost of $800,000. Its useful life is considered to be ?ve years, after which time it is expected to have no residual value. For tax purposes, it can be fully written off over two years. The tax rate is assumed to be 30 per cent.

1. Determine whether the depreciation of the Machine will lead to a deferred tax asset or a deferred tax liability?

2. What would be the deferred tax asset balance or deferred tax liability as of 30 June 2021?

Reference no: EM133127879

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