Intermediate Accounting II

War On Tea Co. reported warranty costs for the year 20x3 totaling $40,000 of which only $5,000 was the amount actually paid out. The remainder is estimated to be paid out over the next 3 years. The tax rate is 20% for all years. There were no other differences between accounting for book income and accounting for taxes. What should be reported for deferred taxes on the 20x3 income statement? A $7,000 deferred tax benefit B $35,000 deferred tax benefit C $7,000 deferred tax expense D $35,000 deferred tax expense