Orwell Optics recorded $522,000 in sales revenue in 2018. The company is subject to a 35% tax rate. Orwell recorded a deferred tax asset of $43,750 in 2018 because of a $125,000 basis difference in warranty liabilities ($125,000 x 35%). Based on its assessment of all positive and negative evidence associated with this deferred tax asset, management has assessed that it is more likely than not that it will not realize 40% of the deferred tax asset. Ignore cost of goods sold. What are the necessary journal entries to record the deferred tax asset and valuation allowance? Prepare a partial 2018 income statement and balance sheet for Orwell Optics and compare it with the financial statements that do not include a valuation allowance. What is the effective tax rate in the two examples? Provide the footnote reconciliation of the federal statutory income tax rate to the effective tax rate in both dollars and percentages, incorporating the use of the valuation allowance. (Assume all sales were made on account.) What are the necessary journal entries to record the deferred tax asset and valuation allowance? (Record debits first, then credits. Exclude explanations from any journal entries. Assume all sales were made on account.) First, record the journal entry for sales revenue in 2018. Account 2018