1. Costello Corporation reported pretax book income of $501,700. During the current year, the reserve for bad debts increased by $8,400. In addition, tax depreciation exceeded book depreciation by $41,700. Finally, Costello received $3,850 of tax-exempt life insurance proceeds from the death of one of its officers. Costello's deferred income tax expense or benefit would be:

a. $6,993 net deferred tax expense.

b. $7,763 net deferred tax benefit.

c. $7,802 net deferred tax expense.

d. $6,993 net deferred tax benefit.