Cavan Company prepared the following reconciliation between book income and taxable income for the current year ended December 31, year 1. 

Pretax accounting income ...............................$1,000,000 

Taxable income ...................................................(600,000) 

Difference $ 400,000 Book-tax differences: 

Interest on municipal income ...........................$ 100,000 

Lower financial depreciation................................300,000 

Total......................................................................$ 400,000 

Cavan’s effective Federal and state income tax rate for year 1 is 30%. The depreciation difference will reverse equally over the next three years at enacted tax rates as follows. 

In Cavan’s year 1 income statement, the deferred portion of its provision for income taxes should be: 

a. $120,000 

b. $80,000 

c. $100,000 

d. $90,000

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Year Tax Rate Year 2 30% Year 3 25% Year 4 25%