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In 2013, its first year of operations, Kitchen Appliance Corporation (KAC) had Income (per books before income taxes) of $500,000. The following items are included in KAC's pre-tax income: interest income from municipal bonds of $10,000; accrued warranty costs, estimated to be paid in 2014 of $25,000; and installment sales revenue of $50,000, which will be collected in 2014. In additin KAC has on its books prepaid insurance expense of $5,000, which will be used in 2014. Assuming the enacted tax rate in effect for 2013 and 2014 is 40%, what amount should KAC report as the net current deferred tax asset or liability on its balance sheet for of December 31, 2013?

a) $12,000 deferred tax liability

b) $22,000 deferred tax asset

c) $10,000 deferrred tax asset

d) $8,000 deferred tax liability

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