In Year1, Craig’s first year of business, Craig reported $460,000 of pretax book (GAAP) income. Key line items follow:

GAAP (book) income:

Revenue 660,000

Other expenses (150,000)

Depreciation expense (40,000)

Penalty expense (10,000)

for a total of

Pre-tax book income 460,000

•For tax purposes, Craig will deduct $55,000 as depreciation expense(instead of $40,000).

•For tax purposes, the penalty expense is non-deductible (in any year).

•The current and expected future tax rate is 25%. No tax payments were made during the year.

1. What is taxable income for Year1?

2. What is tax payable for Year1?

3. What is the amount of deferred tax reported on the balance sheet at 12/31/Year1? Label it as an asset or liability.

4. What will be reported as tax expense on the Year1 income statement?