Nolan Company Sells Its Product on an Installment Basis, Earning

Nolan Company sells its product on an installment basis, earning a $450 pretax gross profit on each installment sale. For accounting purposes the entire $450 is recognized in the year of sale, but for income tax purposes the installment method of accounting is used. Assume Nolan makes one sale in 2007, another sale in 2008, and a third sale in 2009. In each case, one-third of the gross sales price is collected in the year of sale, one-third in the next year, and the final installment in the third year. If the tax rate is 50%, what amount of deferred tax liability should Nolan Company show on its December 31, 2009 balance sheet?

A) $150
B) $225
C) $300
D) $450