Eight Years Ago,Prescott Inc

Multiple Choice

Eight years ago,Prescott Inc.realized a $16,200 gain on the exchange of old equipment for new equipment.Prescott included the gain in book income,but the exchange was nontaxable.This year,Prescott sold the new equipment for $2,500.At date of sale,the equipment's book basis and tax basis had both been depreciated to zero.Which of the following statements is true?

A) The nontaxable exchange had no effect on Prescott's deferred tax accounts.
B) The nontaxable exchange resulted in a deferred tax asset.
C) The sale of the new equipment had no effect on Prescott's deferred tax accounts.
D) None of the above is true.