Question: Smiley Corporation purchased a machine on January 2, 2006, for $2,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes:
2006 $400,000 2009 $230,000
2007 640,000 2010 230,000
2008 384,000 2011 116,000
Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on Smiley's balance sheet at December 31, 2007, should be
Deferred Tax Liability
Current Noncurrent
a. $0 $72,000
b. $ 4,800 $67,200
c. $67,200 $ 4,800
d. $72,000 $ 0
A
B
C
D