4. Cavan Company prepared the following reconciliation between book income and taxable income for the current year ended December 31, year 1.

Pretax accounting income $1,000,000 Taxable income (600,000)

Difference $ 400,000 Book-tax differences:

Interest on municipal income $ 100,000 Tax depreciation in excess of book 300,000 Total $ 400,000 Cavan’s effective Federal and state income tax rate for year 1 is 30%. The depreciation difference will reverse equally over the next three years at enacted tax rates as follows:

Year Tax Rate Year 2 30%

Year 3 25%

Year 4 25%

In Cavan’s year 1 income statement, the deferred portion of its provision for income taxes should be:

a. $120,000

b. $80,000

c. $100,000

d. $90,000