1. In 2007, Admire Company accrued, for financial statement reporting, estimated losses on disposal of unused plant facilities of $1,500,000. The facilities were sold in March 2008 and a $1,500,000 loss was recognized for tax purposes. Assuming that the enacted tax rate is 35% in 2007 and 30% in 2008, and that Admire paid $780,000 in income taxes in 2007, the amount reported as deferred taxes on Admire's balance sheet at December 31, 2007, should be a

A. $420,000 asset. B. $360,000 liability. C. $375,000 asset. D. $450,000 asset.

2. The following information relates to Franklin Freightways for its first year of

operations (data in millions of dollars):

Pretax accounting income: 200

Pretax accounting income included:

Overweight fines (not deductible for tax purposes): 5

Depreciation expense: 70

Depreciation in the tax return: 110

The applicable tax rate is 40%. There are no other temporary or permanent differences.

Franklin's net income ($ in millions) is:

1. $134.
2. $124.
3. $119.4
4. $118.