Millie Co. completed its first year of operations on December 31, 20X1, with pre-tax financial income of $400,000. Millie accrued a contingent liability of $900,000 for financial reporting purposes; however, no tax deduction is permitted until a payment is made. Millie also has gross profit of $800,000 from certain sales recognized currently for financial reporting purposes but that will be taxable as installment sales in 20X2 and 20X3 when the cash is received ($400,000 each year). Millie’s pre-tax financial income includes $38,000 interest earned on its holdings of the bonds of the state of Montana. The tax rate is 21% for all years.

Required:

1. Determine Millie’s taxable income and taxes due for 20X1.

2. Determine the changes in Millie’s deferred tax amounts for 20X1.

3. Calculate tax expense for Millie for 20X1.