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A company has a deductible temporary difference of $15,000 for tax purposes. The tax rate is 15%. The income tax expense for the period is $40,000. After review of evidence, the company determines that it is more likely that not that it will not realize $10,000 of this deductible difference. At the end of the next accounting period, the company expects to realize $12,000 of this deductible difference.
Instructions
Question 1: Record the necessary adjusting entry for the allowance to reduce deferred tax asset account and all necessary adjusting entries.
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