3. Now consider Shipley’s bonus depreciation tax position completing the questions in Excel. Shipley’s management believes that it is more likely than not that the tax position will be sustained on audit and litigation. Shipley has assessed the probabilities of sustaining the bonus depreciation tax position as follows:

Possible Savings Allowed in Dollars - potential estimated savings allowed - individual probability - cumulative probability

50,000-100%-30-20

37500-75%-20-50

30000-60%-40-90

15000-30%-10-100

b. What is the maximum tax benefit recognized by Shipley under ASC740? [Hint: Make sure to consider the tax effects.]

c. Record the journal entry for the portion of the ASC740 liability.

DR. Current income tax expense

CR. income taxes payable