A reconciliation of pretax financial statement income to taxable income is shown below for Shaw-Anderson Industries for the year ended December 31, 2018, its first year of operations. The company offers quality-assurance warranties that extend six months after goods are purchased. The income tax rate is 40%.

Pretax accounting income (income statement)$640,000 Interest revenue on municipal securities (20,000) Warranty expense in excess of deductible amount 45,000 Depreciation in excess of financial statement amount (120,000) Taxable income (tax return)$545,000

What amount should Shaw-Anderson report as a current item related to deferred income taxes on its 2018 balance sheet?

Multiple Choice

• $0 current deferred tax asset or liability
• Deferred income tax liability of $30,000
• Deferred income tax liability of $18,000
• Deferred income tax asset of $18,000

Deferred income tax liability of $18,000 is wrong, what is the correct answer and why?