1. Owl Co. had income before taxes of $860,000 and a tax rate of 30% in their first year of operation. Included in this income is $20,000 in cost of meals and entertainment with customers (Internal Revenue Code allows a deduction for only 50% of such meal and entertainment cost), and depreciation expense of $140,000. Depreciation on Owl's tax return is $190,000. Which of the following statements is true? A) Owl's entry will include a deferred tax liability of $15,000. B) Owl's entry will include a deferred tax asset of $12,000. C) Owl's entry will include a deferred tax liability of $12,000. D) Owl's entry will include a deferred tax asset of $15,000. Owl's entry will include a deferred tax liability of $15,000 based on the following entry: Income Tax Expense (860,000 EBIT + 50%*20,000 M&E expense)*30% = 261,000 Deferred Tax Liability (50,000 temporary difference: 190,000140,000)*30% = 15,000 Income Tax Pavable (860,000 + 10,000 permanent - 50.000 permanent) TI*30% = 246,000