AC 302 Question 1. Question : Stephens Company has a deductible temporary difference of $2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has $1,800,000 of income taxes payable. At the end of the first year, after a careful review of all available evidence, Stephens determines that it is probable that it will not realize $200,000 of this deferred tax asset. At the end of the second year of operations, Stephens Company determines that it expects to realize $1,850,000 of this deferred tax assets. On Stephens Company- income statement for the second year, what amount of income tax expense will it report related to the temporary difference, and is the amount a debit or credit?
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