This is question 5.C.ii from reading 38 on income taxes. The essence is to calculate deferred taxes at the end of 5 years (the end of depreciation for both tax and reporting). Straight line method (used for financial reporting) has total depreciation of 45,000. But double decline method (taxes) depreciates only ~44,300. With 34% tax rate, isn’t there a remaining tax asset of .34 * 700 between the two methods? The answer assumes that straight line is used in the final period, resulting in no deferred tax. My question is won’t companies use the next (6th) period to report the final bit of depreciation and increase cashflow?