1. Phil Company has a deferred tax asset of $54,000 before recording an allowance of $7000 for estimating it is more likely than not that this amount will not be realized in the future. The result of recording this allowance is

1. The deferred tax asset will now be a net amount of $47,000
2. Income tax expense will be reduced by $7000 x the tax rate.
3. Income tax expense will be increased by $7000 x the tax rate.
4. Net income will be increased by $7000.