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Mathis Co. at the end of 2018, its first year of operations, prepared a reconciliation...

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Accounting

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Mathis Co. at the end of 2018, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $ 1,300,000 Estimated litigation expense 4,000,000 Installment sales _(2.600.000) Taxable income $ 2.700,000 The estimated litigation expense of $4,000,000 will be deductible in 2020 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1,300,000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1,300,000 current and $1,300,000 noncurrent. The income tax rate is 30% for all years. The income tax expense is a. $390,000. b. $540,000. c. $600,000. d. $1.200,000

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