During Its First Year of Operations, 2010, the Hico Company $\begin{array}{cc}\text { Income Tax Expense } & 42,000 \\\text { Deferred Tax Asset } & 42,000\end{array}$

question 45

Multiple Choice

During its first year of operations, 2010, the Hico Company reported both a pretax financial and a taxable loss of $200, 000.The income tax rate is 30% for the current and future years.Due to a sufficient backlog of sales orders, Hico did not establish a valuation allowance to reduce the $60, 000 deferred tax asset.However, early in 2011, one major customer, representing 60% of the 2011 year-end sales backlog, went bankrupt.Hico now believes that it is more likely than not that 70% of the deferred tax asset will not be realized.The entry to record the valuation allowance would be

• A)
• \(\begin{array}{cc}
• \text { Income Tax Expense } & 42,000 \\
• \text { Deferred Tax Asset } & 42,000
• \end{array}\)
• B)
• \(\begin{array} { c c }
• \text { Income Tax Benefit from Operating } \\
• \text { Loss Carryforward } & 42,000 \\
• \text { Deferred Tax Asset } & 42,000
• \end{array}\)
• C)
• Income Tax Expense \(\quad \) \(\quad \) \(\quad \)\(42,000\)
• Allowance to Reduce Deferred
• Tax Asset to Realizable Value \(\quad \) \(\quad \) \(\quad \)42,000
• D)
• Allowance to Reduce Deferred Tax
• Asset to Realizable Value \(\quad 42,000\)
• Income Tax Expense \(\quad \) \(\quad \) \(\quad \) \(\quad \) \(\quad \)42,000

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Definitions:

Testosterone

A primary male sex hormone responsible for the development and maintenance of male physical characteristics and reproductive tissues.

Luteinizing Hormone

A hormone produced by the anterior pituitary gland that plays a key role in regulating the menstrual cycle and ovulation in females, and testosterone production in males.

Progesterone

A steroid hormone involved in the menstrual cycle, pregnancy, and embryo development.

Aldosterone

Aldosterone is a steroid hormone produced by the adrenal cortex that regulates sodium and potassium balance in the blood, influencing blood pressure and fluid balance.