Mobe Co. reported the following operating income (loss) for its first three years of operations:

2004

$ 300,000

2005

(700,000)

2006

1,200,000

For each year, there were no deferred income taxes, and Mobe’s effective income tax rate was 30%. In its 2005 income tax return, Mobe elected to carry back the maximum amount of loss possible. Additionally, there was more negative evidence than positive evidence concerning profitability for Mobe in 2006. In its 2006 income statement, what amount should Mobe report as total income tax expense?

  1. $120,000
  2. $150,000
  3. $240,000
  4. $360,000