The McGuire Company reported net income in its financial statements of $400,000 (before tax) in Year One. The tax rate is currently 30 percent but is expected to go up to 34 percent at the start of Year Two. The company has revenue of $130,000 that will not be taxed until Year Two. In addition, the company has another $60,000 in revenue that will never be taxed. What does the company show as its income tax expense for Year One?

• A. Income tax expense - current is $63,000 and income tax expense - deferred is $19,200
• B. Income tax expense - current is $63,000 and income tax expense - deferred is $39,000
• C. Income tax expense - current is $120,000 and income tax expense - deferred is $44,200
• D. Income tax expense - current is $63,000 and income tax expense - deferred is $18,000

A company has an enacted tax rate of 30 percent. During Year One, the company reported a $156,000 gain for financial reporting purposes that would not be taxed until Year Two. During Year Two, the company had another gain, this one for $208,000, that would not be taxed until Year Three. On its Year Two income statement, what amount should be reported as the company's income tax expense-deferred?

• A. $109,200
• B. $62,400
• C. $15,600
• D. $46,800