Southern Atlantic Distributors began operations in January 2016 and purchased a delivery truck for $120,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful life for financial reporting purposes. For tax purposes, the deduction is 50% of cost in 2016, 30% in 2017, and 20% in 2018. Pretax accounting income for 2016 was $540,000, which includes interest revenue of $70,000 from municipal bonds. The enacted tax rate is 40%.

Assuming no differences between accounting income and taxable income other than those described above:

What is the income subject to taxation recorded as?

(a) deferred tax asset

(b) deferred tax liability

(c) income tax payable

(d) income tax expense

• Record2016incometaxes.
• What is Southern Atlantics 2016 net income?