In the current year, Madison Corporation had $50,000 of taxable income at a tax rate of 25%. During the year, Madison began offering warranties on its products and has a warranty liability for financial reporting purposes of $5,000 at the end of the year. Warranty expenses are not deductible until paid for income tax purposes.

Hide

Prepare the additional journal entry necessary for Madison Corporation assuming that the corporation decides that it is "more likely than not" that $500 of the $5,000 future deductible amount will not be realized.