Refer to Practice 16–9. The company had no taxable income in past years. Analysis of prospects for the future indicates that it is more likely than not that total taxable income in the foreseeable future will be no more than $20,000. Assume that the income tax expense journal entry required in Practice 16–9 has already been made. Make any necessary adjusting entry.

Data From Practice 16–9

Deferred Tax Asset
The company started business on January 1 and had revenues of $60,000 for the year.
In addition to income tax expense, the company’s only other expenses are as follows:
Bad debt expense of $10,000. Tax rules do not allow any deduction until the bad debts are actually written off. During the year, bad debts totaling $2,000 were written off. Postretirement health care benefit expense of $15,000. Tax rules do not allow any deduction until the actual retiree health care expenditures are made. No expenditures were made during the year. The income tax rate is 35% for the current year and all future years. Assume that the company is more likely than not to be profitable in future years. Prepare the journal entry or entries necessary to record income tax expense for the year.