Ovate, Inc., earns $140,000 in book income before tax and is subject to a 21 % marginal Federal income tax rate. Ovate records a single temporary difference:
Warranty expenses deducted for book purposes are $8,000, of which only $2,000 are deductible for tax purposes. There have been no book-tax differences in prior tax years.
a. Determine the amount of Ovate's deferred tax asset or liability.
b. Express your computation as a Microsoft Excel formula.