For Year 2, Woozie Inc. reported depreciation of $600,000 in its income statement. On its Year 2 income tax return, Woozie reported depreciation of $900,000. Woozies income statement also included $100,000 accrued warranty expense that will be deducted for tax purposes when paid. Woozies enacted tax rates are 30% for Year 2 and Year 3, and 25% for Year 4 and Year 5. The depreciation difference and warranty expense will reverse over the next three years as follows:

	Depreciation difference	Warranty expense
Year 3	$ 140,000	$ 35,000
Year 4	100,000	40,000
Year 5	60,000	25,000
Total	$ 300,000	$ 100,000

These were Woozies only temporary differences. In Clark's Year 2 income statement, the deferred portion of its provision for income taxes should be:

• A.

  $120,000

• B.

  $55,250

• C.

  $60,000

• D.

  $108,750