Use the Following Information for Questions

question 76

Multiple Choice

Use the following information for questions.
Mathis Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,250,000 will be deductible in 2012 when it is expected to be paid.The gross profit from the installment sales will be realized in the amount of $500,000 in each of the next two years.The estimated liability for litigation is classified as non-current and the installment accounts receivable are classified as $500,000 current and $500,000 noncurrent.The income tax rate is 30% for all years.
-The net deferred tax asset to be recognized is

• A)$0.
• B)$150,000.
• C)$375,000.
• D)$225,000.

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Definitions:

Uplifts

Positive experiences or occurrences that can improve one's mood and counterbalance stress, enhancing overall well-being.

Hassles

Minor everyday annoyances or problems that, cumulatively, can contribute to stress and affect well-being.

Downturns

Periods or phases characterized by economic decline, reduced activity, or diminished performance.

Distress

A negative emotional state that is a response to stress, characterized by feelings of anxiety, sorrow, or pain.