Steafan Farley Furs, an IFRS reporter, took an aggressive tax position and deducted it on its current tax return. The account is debit to Income Tax expense and credit to income taxes payable and tax contingency.

Steafan Farley Furs, an IFRS reporter, took an aggressive tax position and deducted $380,000 on its current tax return. (Click the icon to view additional information.) Requirement Prepare the current year journal entry for the tax provision using the most likely amount approach. (Record debits first, then credits. Exclude explanations from any journal entries.) More info This type of deduction has been challenged by tax jurisdictions in the past when examining the tax returns of other firms in the industry. The company is subject to a 28% income tax rate and does not report any book-tax differences. Farley reported income equal to $775,000, prior to taking the $380,000 tax deduction. This amount is reported on both Farley's income tax returns and on its financial statements. After meeting with tax consultants, management determined that it is not probable that the taxing authorities will accept the tax position taken. The potential tax benefit will be assessed by using the following estimated outcomes and probabilities of occurrence