If Income Tax Expense Reported on the Income Statement Is

Multiple Choice

If income tax expense reported on the income statement is $45,000 for 2016, and the tax return for 2016 (the first year) shows an income tax liability of $42,000, the deferred income tax on the balance sheet at the end of 2016 will be which of the following? Assume a 40% tax rate.

A) A $3,000 liability.
B) A $3,000 asset.
C) A $7,500 liability.
D) A $7,500 asset.