Problem
Labo Corp.'s Year 1 pretax income for financial reporting was $125,000, which included a $17,000 penalty for operating without a proper retail license and a $15,000 depreciation expense. MACRS depreciation on the tax return was $22,000. The enacted tax rates are 25% in Year 1 and 30% in future years. What amounts should Labo report as current and deferred tax liabilities on its Year 1 balance sheet?