Cullumber Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Extra depreciation for taxes $2395000 3395000 (5406000) $ 384000 Taxable income The estimated litigation expense of $3395000 will be deductible in 2018 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 40% for all years. The deferred tax asset to be recognized is $720800. $958000. O $1358000. O $153600. Crane Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales Taxable income $1020000 2750000 (2000000) $1770000 The estimated litigation expense of $2750000 will be deductible in 2019 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1000000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1000000 current and $1000000 noncurrent. The income tax rate is 40% for all years. The deferred tax liability to be recognized is O $800000. $708000. O $400000. O $1900000. At December 31, 2017 Crane Corporation reported a deferred tax liability of $175000 which was attributable to a taxable temporary difference of $850000. The temporary difference is scheduled to reverse in 2021. During 2018, a new tax law increased the corporate tax rate from 30% to 35%. Crane should record this change by debiting O Income Tax Expense for $8750. Retained Earnings for $8750. Income Tax Expense for $42500. O Retained Earnings for $42500