At the end of the preceding year, World Industries had a deferred tax asset of $22,500,000, attributable to its only temporary difference of $60,000,000 for estimated expenses. At the end of the current year, the temporary difference is $55,000,000. At the beginning of the year there was no valuation account for the deferred tax asset. At year-end, World Industries now estimates that it is more likely than not that one-third of the deferred tax asset will never be realized. Taxable income is $13,000,000 for the current year and the tax rate is 30% for all years.

requiredRecord valuation allowance for the year end.

Journal entry