For calendar Year 1, Clark Corp. reported depreciation of $300k in its IS.  On its Year 1 income tax retunr, Clark reported depr of $500k.  Clark’s income statement also included $50k of accrued warranty exp that will be deducted for tax purposes when paid.  Applicable eacted tax rates are 30% for Year 1 and Year 2, and 25$ for Year 3 and Year 4.  The depreciation defference and warranty expense will reverse over the next 3 years as follows:

           Depr Diff         &n bsp; Warranty Exp

Year 2      80k         &nb sp;        10k

Year 3      70k         &nb sp;        15k

Year 4      50k         &nb sp;        25k

These were Clark’s only temporary differences.  In Clark’s Year 1 income statement, the deferred portion of its provision for income taxes should be?

The answer is $41K, and I don't understand why.  They netted the two amounts against eachother and used the respective tax rates for each year.  Why would they be netted against each other, and as I am typing this I know see why the one is a deferred asset and the other is a defered liab.

Okay my question just answered itself but i will still post this question because I think its a good one and I took the time to type it up.