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At the end of year one, Cody Co. reported a profit on a partially completed construction contract by applying the percentage-of-completion method. By the end of year two, the total estimated profit on the contract at completion in year three had been drastically reduced from the amount estimated at the end of year one. Consequently, in year two, a loss equal to onehalf of the year one profit was recognized. Cody used the completed-contract method for income tax purposes and had no other contracts. The year two balance sheet should include a deferred tax
Asset
Liability