In $20$X$1,$ Phillips Company reported $$10,000,000$ of pre$-$tax book Income and also had $$10,000,000$ of taxable Income. It Incurred a

$$1,000,000$ book expense that it deducted on its tax return. Assuming a $21\%$ tax rate, this deduction results in a $$210,000$ tax benefit.

The tax law was unclear at that time whether this expense was deductible, so it led to an uncertaln tax position.

As of December $31,201,$ this uncertain tax position had a $60\%$ likellhood of being sustained based on technical merits, $$90,000$ of

the benefit was recognized, and a tax contingency reserve of $$120,000$ was created for this position.

A court decision in $20$X$2$ lowered the likelihood that this uncertain tax position would be sustained on technical merits to $40\%$ and led

to the following amounts and related individual probabilitles of possible outcomes as of December $31,20\backslash$times $2$:

$10\%$ likellhood of realizing $$210,000$

$15\%$ likelihood of realizing $$150,000$

$30\%$ likellhood of reallzing $$30,000$

$45\%$ likellhood of realizing $$0$

Required:

Based on these facts, provide the journal entry that Phillips would make in $201$ to record its income tax activity, Including the tax

contingency for unrecognized tax benefits.

Provide the entry Phillips would make in $202$ to record any change in the status of the tax contingency reserve.

$($If no entry is required for a particular transaction, select $"$No Journal entry required" In the first account fleld.$)$

Journal entry worksheet

Record the journal entry that Phillips would make in $201$ to record its income

tax activity, including the tax contingency for unrecognized tax benefits.

Note: Enter debits before credits.