Find what amount should be report as deferred tax liability

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Reference no: EM132740037

Milan Company prepared the following reconciliation for the first year of operations:

Pretax financial income for 2016      9,000,000

Tax-exempt interest income        (750,000)

Temporary difference           (2,250,000)

Taxable income6,000,000

Problem 1: The temporary difference will reverse evenly in 2017 and 2018 at an enacted tax rate of 35% in 2017, and 32% in 2018. The tax rate for 2016 is 30%. What amount should be reported as deferred tax asset or liability on December 31, 2016?

Option 1: 720,000 asset
Option 2: 720,000 liability
Option 3: 720,000 liability
Option 4: 753,750 asset

Reference no: EM132740037

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