In 2010, Its First Year of Operations, Bandera Corporation Reported

Multiple Choice

In 2010, its first year of operations, Bandera Corporation reported pretax financial income of $80, 000 for the year ended December 31.Bandera depreciates its fixed assets using an accelerated cost recovery method for tax purposes and straight-line depreciation for financial reporting.On assets acquired in 2010, the following are differences between depreciation on the tax return and accounting income during the asset's five-year life: $\begin{array}{lll} & \text {Tax Depreciation in Excess}& \text { Enacted}\\& \text { of Book- Denreciation}& \text {Tax Rata} \\ 2010 & \$ 18,000 &30 \% \\2011 & 10,000 &30 \% \\2012 & 2,000 & 35 \% \\2013 & (13,000) & 35 \% \\2014 & (17,000) & 40 \% \\\end{array}$
Assuming no other temporary or permanent differences, Bandera's December 31, 2010 balance sheet should include
$$\begin{array}{l}&\text {Noncurent Deferred}&\text {Income Taxes}\\&\text {Income Tax Liability}&\text {Payable}\\\text {I. }&\$ 5,400 & \$ 18,600 \\\text {II.}&\$ 7,650 & \$ 18,600 \\\text {III.}&\$ 7,650 & \$ 79,400 \\\text {IV.}&\$ 5,400 & \$ 74,000\end{array}$$

A) I
B) II
C) III
D) IV