Milton Manufacturing Manufactures and Sells Ornamental Statues

Multiple Choice

Milton Manufacturing manufactures and sells ornamental statues.Because of good styling and marketing,sales have grown briskly.Milton has no pre-existing deferred tax liability.During 20X3,the following transactions occurred: 1.On January 1,20,000 new shares of common stock were sold at $100 per share.
2) Half of the proceeds from the stock sale were immediately invested in tax-free bonds yielding 8% per annum.The bonds were held throughout the year,resulting in interest revenue of $1,000,000 × .08 = $80,000.
3) Sales for the year were $9,000,000,with expenses of $4,300,000 reported under GAAP (not including income tax expense) .
4) Tax depreciation exceeded depreciation included in item 3 above by $500,000.
What would Milton report as income tax expense for shareholder reporting using a 40% tax rate?

A) $1,912,000
B) $1,880,000
C) $1,800,000
D) $1,897,000
E) $1,865,000