Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income $ 800,000

Estimated litigation expense 2,000,000

Installment sales (1,600,000)

Taxable income $ 1,200,000

The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 40% for all years.

1. The income tax expense is

a. $240,000.

b. $320,000.

c. $360,000.

d. $400,000.

2. The deferred tax asset to be recognized is

a. $240,000 current

b. $240,000 noncurrent.

c. $800,000 current.

d. $800,000 noncurrent.

3. The deferred tax liabilitycurrent to be recognized is

a. $240,000.

b. $480,000.

c. $320,000.

d. $640,000.