Find the deferred tax liability to be recognized

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Question - Sandhill Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income $3440000

Estimated litigation expense 4440000

Extra depreciation for taxes (6432000)

Taxable income $1448000

The estimated litigation expense of $4440000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2144000 in each of the next 3 years. The income tax rate is 20% for all years.

Find the deferred tax liability to be recognized?

A. $888000.

B. $1086400.

C. $688000.

D. $1286400.

Reference no: EM132610153

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