A company has a deductible temporary difference of $100,000 at the end of its first year of operations. Its tax rate is 40%. Income taxes payable are $90,000. The company properly recorded a deferred tax asset. Later, after careful review of all available evidence, it is determined that it is more likely than not that $15,000 of the deferred tax asset will not be realized. What entry should be made to record the reduction in asset value?

a.

Debit:Income Tax Expense 15,000; Credit:Deferred Tax Asset 15,000

b.

Debit:Income Taxes Payable 15,000; Credit:Income Tax Expense 15,000

c.

Debit:Allowance to Reduce Deferred Tax Asset to Expected Realizable Value 15,000; Credit:Income Tax Expense 15,000

d.

Debit:Income Tax Expense 15,000; Credit:Allowance to Reduce Deferred Tax Asset to Expected Realizable Value 15,000