_____ on 1/1/06, Savtex, an Irish Subsidiary of Pavtex, Acquired

Multiple Choice

_____ On 1/1/06, Savtex, an Irish subsidiary of Pavtex, acquired a copyright for 100,000 LCU. Ireland's GAAP and income tax laws require amortization over no more than four years. Accordingly, Savtex uses a four-year life, even though the patent has a useful life of 10 years. Savtex's income tax rate is 40%. What adjustment, if any, is required for the income tax accounts at 12/31/07 (not 2006) ?

A) Credit Deferred Income Taxes Payable for $6,000.
B) Credit Deferred Income Taxes Payable for $12,000.
C) Debit Prepaid Income Taxes for $6,000.
D) Debit Prepaid Income Taxes for $12,000.
E) Make no entry to the tax accounts.