The following information is taken from the accounts of Miller company after its first year of operations:

Income before taxes $100,000

Federal income tax payable $41,600

Deferred income tax (1,600)

40,000

Net Income $60,000

Miller estimates its annual warranty expense as a percentage of sales. the amount charged to warranty expense on its books was $38,000. No other differences existed between accounting and taxable income. Assuming a 40% income tax rate, what amount was actually paid this year on the company warranty

1. $34,000
2. $38,000
3. $40,000
4. $42,000