Information for questions 10. and 11. Watson Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2017 $1,400,000 Tax exempt interest (permanent difference) (100,000) Originating temporary difference (300,000) Taxable income $1,000,000

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 21%. The enacted tax rate for 2017 is 35%.

10. What amount should be reported in its 2017 income statement as the current portion of its provision for income taxes? a. $350,000 b. $490,000 c. $455,000 d. $385,000

11. What amount should be shown on the balance sheet for Watsons deferred taxes? a. $63,000 deferred tax liability current b. $63,000 deferred tax liability long-term c. $31,500 deferred tax asset current d. $31,500 deferred tax liability long term