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Use the following information for questions 1 through 3. Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between
Use the following information for questions 1 through 3. Mathis Co. at the end of 2014, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: The estimated litigation expense of $2,000,000 will be deductible in 2016 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $800,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $800,000 current and $800,000 noncurrent. The income tax rate is 40% for all years. 1. The income tax expense is a. $240,000. b. $320,000. c. $360,000. d. $400,000. 2. The deferred tax asset to be recognized is a. \$240,000 current b. $240,000 noncurrent. c. $800,000 current. d. $800,000 noncurrent. 3. The deferred tax liabilitycurrent to be recognized is a. $240,000. b. $480,000. c. $320,000. d. $640,000
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