At the end of the prior year, Specialized Incorporated had a deferred tax asset account with a balance of $1,600,000 and a valuation allowance of $480,000. The deferred tax asset is attributable to a temporary book-tax difference of $8,000,000 in a liability for estimated expenses. At the end of the current year, the temporary difference is $5,000,000. Specialized has no other temporary differences. Taxable income for the current year is $95,000,000 and the tax rate is 20%.

Required:

Compute the December 31 balance in the Deferred tax asset account, and the pretax accounting income amount for the current year.

Record income taxes for the current year.

Prepare the journal entry to adjust the valuation allowance assuming the deferred tax asset will be realized in full.

Prepare the journal entry to adjust the valuation allowance assuming, instead that it is more likely than not that only 30% of the deferred tax asset ultimately will be realized.