Question: Frankfort Company identifies depreciation as the only difference for future taxable amounts. In Year 1, its depreciation for financial reporting purposes is $3,500 and $5,000

Frankfort Company identifies depreciation as the only difference for future taxable amounts. In Year 1, its depreciation for financial reporting purposes is $3,500 and $5,000 for income tax reporting purposes. Frankfort Company has an income tax rate of 35%. Explain whether this is a deferred tax asset or deferred tax liability, and calculate the amount.

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