Kara Fashions uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. Three years after its purchase, one of Kara's buildings has a carrying value of $400,000 and a tax basis of $300,000. There were no other temporary differences and no permanent differences. Taxable income was $4 million and Kara's tax rate is 40%. What is the deferred tax liability to be reported in the balance sheet? Assuming that the deferred tax liability balance was $32,000 the previous year, prepare the appropriate journal entry to record income taxes this year.
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