In Its First Year of Operations, Woodmount Corporation Reported Pretax

question 51

Multiple Choice

In its first year of operations, Woodmount Corporation reported pretax accounting income of $500 million for the current year. Depreciation reported in the tax return in excess of depreciation in the income statement was $60 million. The excess tax will reverse itself evenly over the next three years. The current year's tax rate of 40% will be reduced under the current law to 35% next year and 30% for all subsequent years. At the end of the current year, the deferred tax liability related to the excess depreciation will be:

• A) $21 million.
• B) $24 million.
• C) $18 million.
• D) $19 million.

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