1.

Cullumber Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income	$ 2395000
Estimated litigation expense	3395000
Extra depreciation for taxes	( 5406000)
Taxable income	$ 384000

The estimated litigation expense of $ 3395000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $ 1802000 in each of the next 3 years. The income tax rate is 20% for all years. Income taxes payable is

$ 602200.

$ 76800.

$ 402200.

$ 0.

2.

Sandhill Company reported the following results for the year ended December 31, 2021, its first year of operations:

	2021
Income (per books before income taxes)	$ 1804000
Taxable income	3000000

The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2022. What should Sandhill record as a net deferred tax asset or liability for the year ended December 31, 2021, assuming that the enacted tax rates in effect are 30% in 2021 and 25% in 2022?

$ 358800 deferred tax asset

$ 299000 deferred tax liability

$ 299000 deferred tax asset