Assume Darion Company’s current income tax payable is $300M in 2018 after claiming a questionable $80 million tax benefit. Historically, the IRS has challenged many deductions of this type. The following table represents estimates of Darion’s management with respect to the likelihood of various amounts of tax benefit that should be upheld:

Amount of the tax benefit that $80M $70M $60M $50M $40M

management expects to be upheld

Percent likelihood 15% 20% 40% 15% 10%

Part 1 Make the entry that Darion should record to reflect their income tax for 2018 based upon management estimates.

Part 2 Assume the uncertainty is resolved in the future resulting in the entire benefit being disallowed. What entry would Darion make?

Part 3 Assume the uncertainty is resolved in the future resulting in the entire benefit being allowed. What entry would Darion make?

Part 4 Assume the uncertainty is resolved in the future resulting in $60 M of the $80M benefit being allowed as expected. What entry would Darion make?