Pear, Inc Owns 80 Percent of Apple Corporation

Multiple Choice

Pear, Inc. owns 80 percent of Apple Corporation. During the current year, Apple reported earnings before tax of $400,000 and paid a dividend of $120,000. The income tax rate for each company is 40 percent and separate tax returns are prepared. What deferred income tax liability arising this year must be recognized in the consolidated balance sheet?

A) $0.
B) $7,680.
C) $17,920.
D) $38,400.
E) $51,200.