Based on the information provided in E17- 19, assume that Lewis Eagle ­Corporation reported the following income levels for both book and tax purposes for the following year.
In E17-19
Filed Amount of the Likelihood That the Tax
Exclusion That Management Position Will Be Sustained at
Expects to Maintain This Level (%)
$ 2,500,000 …………………………………….10%
2,000,000 ………………………………………20%
1,500,000 ……………………………………… 25%
1,000,000 ……………………………………… 35%
880,000 ………………………………………… 10%
Description Amount
Income before Exclusion………… $ 8,000,000
Tax Exclusion …………………… (3,000,000)
Income before Tax $ 5,000,000
Assume that Lewis Eagle passed the more- likely- than- not test. Based on an analysis of the estimated cumulative probabilities, Lewis Eagle should recognize a tax benefit of $ 1,950,000. Assuming a tax rate of 30%, prepare the journal entry/ entries needed to record the tax provision for the ­current year.