Prepare journal entry to record doubtfuls income tax expense

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At the end of the prior year, Doubtful Inc. had a deferred tax asset of 520,000,000 attributable to its only timing difference, a temporary difference of $50,000,000 in a liability for estimated expenses. At that time a valuation allowance of $4,000,000 was established. At the end of the current year, the temporary difference is $45,000,000, and Doubtful determines that the balance in the valuation account should now be $5,000,000. Taxable income is S15,000,000 and the tax rate is 40% for all years.

Required: Prepare journal entries to record Doubtful's income tax expense for the current year. Show well-labeled supporting computations for the income tax payable, the valuation allowance, and the change in the deferred tax asset account.

Reference no: EM13848733

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