For Questions 4-9, please use the information below.

Suppose that Dollar General bought equipment (PPE) for $1,000,000 using cash on January 1, 2017. The equipment has a 5-year useful life and zero salvage value. Over the fiscal year 2017 and 2018, operating income before depreciation and taxes (all cash) is $2,000,000. Please record the deferred tax expense, tax expense and tax cash payments as of December 31 2017 and 2018. Assume that taxes are paid to the IRS on Dec 31 of each year and use a depreciation rate of 100% for tax purposes. Assume a tax rate of 40%. (multiple choice)

Question 4. How much tax did Dollar General pay in 2017?

1) $720,000 2) $400,000 3) $320,000 4) $80,000

Question 5. How much was the tax expense (financial accounting) that Dollar General recorded on its income statement in 2017?

1) $720,000 2) $80,000 3) $400,000 4) $320,000

Question 6. Based on the information above, which of the following statements is true?

1) In 2017, Deferred tax liabilities increase by $320,000

2) In 2017, Deferred tax liabilities decrease by $80,000

3) In 2017, Deferred tax liabilities increase by $400,000

4) In 2017, Deferred tax liabilities decrease by $320,000

Question 7. How much tax did Dollar General pay in 2018?

1) $400,000 2) $800,000 3) $320,000 4) $80,000

Question 8. How much was the tax expense (financial accounting) that Dollar General recorded on its income statement in 2018?

1) $720,000 2) $320,000 3) $80,000 4) $800,000

Question 9. Based on the information above, which of the following statements is true?

1) In 2018, Deferred tax liabilities decrease by $320,000

2) In 2018, Deferred tax liabilities increase by $80,000

3) In 2018, Deferred tax liabilities decrease by $80,000

4) In 2018, Deferred tax liabilities increase by $320,000