On January 1, 2023, Lake Corp., a publicly accountable enterprise, purchased 40% of the common shares of Michigan Inc. and accounts for this investment by the equity method. During 2023, Michigan reported earnings of $900,000 and paid dividends of $300,000. Assume that these dividends are taxable to Lake when received. Lake assumes that all of Michigan's undistributed earnings will be distributed as dividends in future periods when the enacted tax rate will be 20%. Lake's current income tax rate is 25%. The increase in Lake's deferred tax liability for this temporary difference is OA) $120,000. O B) $100,000. C) $60,000. OD) $48,000.

On January 1, 2023, Lake Corp., a publicly accountable enterprise, purchased 40% of the common shares of Michigan Inc. and accounts for this investment by the equity method. During 2023, Michigan reported earnings of $900,000 and paid dividends of $300,000. Assume that these dividends are taxable to Lake when received. Lake assumes that all of Michigan's undistributed earnings will be distributed as dividends in future periods when the enacted tax rate will be 20%. Lake's current income tax rate is 25%. The increase in Lake's deferred tax liability for this temporary difference is A) $120,000. B) $100,000. C) $60,000. D) $48,000