Two independent situations are described below. Each involves future deductible amounts and/ or future tax-able amounts produced by temporary differences:

The enacted tax rate is 40% for both situations. Determine the deferred tax asset balance at year- end.

Situation Taxable income Amounts at yearend: Future deductible amounts Future taxable amounts Balances at beginning of year: Deferred tax asset Deferred tax liability 2 $40,000 $80,000 10,000 5,000 5,000 S1,000 S 4,000 1,000