Assume the same information in Exercise 18-61, except that there is a \(\$ 12,000\) beginning balance in the valuation allowance.

Required

a. Record the income tax journal entries on December 31, 2020, assuming that it is more likely than not that the deferred tax asset will be realized.

b. Record the income tax journal entries on December 31, 2020, assuming that it is more likely than not that only \(60 \%\) of the deferred tax asset will be realized.

Exercise 18-61

Allied Corp. has a deferred tax asset balance of \(\$ 50,000\) on December 31,2020 , due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferred tax asset balance has increased \(\$ 10,000\) over the prior year ending balance of \(\$ 40,000\). Taxable income for 2020 is \(\$ 210,000\) and the tax rate is \(25 \%\). There was no valuation allowance recorded on December 31, 2019.