On January 1, Year 1, Santana Corp. purchased equipment for $75,000 with a five-year useful life. Santana depreciates the equipment for reporting purposes using the straight-line method. Pretax GAAP income for Year 1 is $148,000. For tax purposes, the company depreciates 100% of the equipment balance in Year 1. The companys tax rate is 25%.

What is income tax expense for Year 1 and what is the balance of the deferred tax liability on December 31 of Year 1? Income tax expense Deferred tax liability

Income tax expence Deferred tax liability

A) $67,000 $15,000

B) $ 7,000 $ 0

C) $37,000 $15,000

D) $82,000 $60,000

E) $37,000 $52,000

Please show your work, so I can see the process.