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    ABC Co. at the end of 2007, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
    Pretax financial income $ 750,000
    Estimated litigation expense 1,000,000
    Extra depreciation for taxes (1,500,000)
    Taxable income $ 250,000
    The estimated litigation expense of $1,000,000 will be deductible in 2008 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years. The income tax rate is 30% for all years.

    21. Income tax payable is
    a. $0.
    b. $75,000.
    c. $150,000.
    d. $225,000.

    22. The deferred tax asset to be recognized is
    a. $75,000 current.
    b. $150,000 current.
    c. $225,000 current.
    d. $300,000 current.

    23. The deferred tax liability to be recognized is
    Current Noncurrent
    a. $150,000 $300,000
    b. $150,000 $225,000
    c. $0 $450,000
    d. $0 $375,000

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