7) Axis Corporation, a calendar year company, generates $300,000 of pre-tax book income in 2020. Comparing the U.S. tax rules with the U.S. GAAP rules, the company identifies two differences. First, the company incurred and expensed $50,000 in meals that are only 50% deductible for tax purposes. Second, the company purchased a patent on July 1, 2020 with a fair market value of $450,000. The patent was amortized over the remaining legal life of 10 years for book purposes, but must be amortized over 15 years for tax purposes because it is a business acquisition intangible. Assume the federal income tax rate is 21 percent.

A) Prepare the journal entry for Axis Corporations current and deferred income tax expense, income tax payable, and the increase or decrease in deferred tax assets or liabilities for financial reporting purposes in 2020.

B) Prepare the effective tax rate reconciliation for Axis Corporation for 2020 in dollars and percentages.

C) Assume Axis Corporation examines the following tax planning activity for FIN 48 purposes at the end of the 2022 tax year: Probability that the position will be sustained upon audit = 60%. Tax Benefits Retained $8,000 $5,000 $2,000 Individual Probability 40% 30% 20% Cumulative Probability 40% 70% 90% $0 Under FIN 48, how much of a UTB liability, if any, should the company accrue for 2022? Please explain.

Probability that the position will be sustained upon audit =60%