Mitchell Corporation prepared the following reconciliation for its first year of operations:
Pretax financial income for 2015 $ 900,000
Tax exempt interest (75,000)
Originating temporary difference (175,000)
Taxable income $650,000
The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2015 is 35%.
What amount should be reported in its 2015 income statement as the deferred portion of income tax expense?
$87,500 credit
$70,000 debit
$87,500 debit
$70,000 credit