Multiple Choice Question 55 Your answer is incorrect. Try again. Pharoah Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Installment sales $1500000 3200000 (2120000) $2580000 Taxable income The estimated litigation expense of $3200000 will be deductible in 2019 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1060000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1060000 current and $1060000 noncurrent. The income tax rate is 40% for all years. The income tax expense is $1060000 O $1032000 O $600000. O $530000