_____ Pellax Owns 100% of the Outstanding Common Stock of Sellax

Multiple Choice

_____ Pellax owns 100% of the outstanding common stock of Sellax, a foreign subsidiary located in a country having a 25% income tax rate and a 10% dividend withholding tax. For 2006, Sellax reported net income of $600,000 and paid dividends of $250,000. Pellax intends for Sellax's remaining earnings to be distributed as dividends in the near future. Pellax's income tax rate is 40%. What amount should Pellax report for deferred income taxes payable in its balance sheet at 12/31/06?

A) $ -0-
B) $25,000
C) $35,000
D) $50,000
E) $70,000