Problem - Wildhorse Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

Pretax financial income $2835000

Estimated litigation expense 3835000

Extra depreciation for taxes (5838000)

Taxable income $  832000

The estimated litigation expense of $3835000 will be deductible in 2018 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $1946000 in each of the next 3 years. The income tax rate is 40% for all years.

The deferred tax liability to be recognized is

$2335200.

$1534000.

$1935200.

$1134000.