Graphics, Inc. has a deferred tax asset of $4,000,000 on its books. As of December 31, it is probable that $2,000,000 of the deferred tax asset's value will never be realized because of the uncertainty about future income. Graphics, Inc. should:
A.Reduce the deferred tax asset account by $2,000,000.
B.Establish a valuation allowance of $2,000,000.
C.Establish an offsetting deferred tax liability of $2,000,000.
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