The Wolf Group recorded a deferred tax asset of $50,000 due to a basis difference in warranty liabilities.Management has assessed that it is more likely than not that the firm will not realize 30% of the deferred tax asset.After recording the valuation allowance,Wolf's net income will ________ and assets will ________.

Question

Quizplus · Accepted Answer

The valuation allowance reduces the deferred tax asset by 30% of $50,000, which is $15,000. This reduction decreases net income and assets by $15,000.

The Wolf Group Recorded a Deferred Tax Asset of $50,000