For calendar year 2007, Neer Corp. reported depreciation of $1,200,000 in its income statement. On its 2007 income tax return, Neer reported depreciation of $1,800,000. Neer's income statement also included $225,000 accrued warranty expense that will be deducted for tax purposes when paid. Neer's enacted tax rates are 30% for 2007 and 2008, and 24% for 2009 and 2010. The depreciation difference and warranty expense will reverse over the next three years as follows:
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