Zeta Corporation reported taxable income for 2019 of $200,000. The enacted tax rate for 2019 is 40%. During 2019, Zeta became the defendant in a lawsuit. The lawsult has no been resolved at the end of the period, but Zeta's lawyers believe that it is probable that the company will be held liable. The legal office estimated that the amount of loss will be $80,000. As a result, the lawsuit has been recognized as a contingent liability. However, the legal obligation is not deductible for tax purposes during 2019. The lawsuitroprosent the only difference between financial income and taxable income for the year. Required: 1. Assume that Zeta Corporation has been quito profitable in past periods and expects to continue that pattern in the future. Record a journal entry to recognize tax expense, tax payable, and deferred tax for 2019. 2. Assume that there is substantial doubt about whether Zota Corporation will be profitable in tre periods. As a result, the company believes that one-half of the future deduction for legal costs will not be realized. Record a journal entry to recognize tax expense, tax payable, and deferred tax for the year. 3. Next Level Explain what circumstances require that a valuation allowance account should be utilized when deferred tax is recognized. How For the year ended December 31, 2019, Nelson Co.'s income statement showed income of 5435,000 before income tax expense. To compute taxable income, the following differences were noted: Income from tax-exempt municipal bonds Depreciation deducted for tax purposes in excess of depreciation recorded on the books Proceeds received from life insurance on death of an insured employee Corporate tax rate for 2019 Enacted tax rate for future periods $60,000 120,000 100,000 30% 35% Required: 1. Calculate taxable income and tax payable for fax purposes. 2. Prepare Nelson's income tax journal entry at the end of 2019