Please help out- KLH company

[ansumania]

KLH company reported the following:

- Gross DTA at the beginning of the year $10500
-Gross DTA at the end of the year $11250
-Valuation allowance at the beginning of the year: $2700
-Valuation allowance at the end of the year: $3900

Which of the following statements best describes the expected earnings of the firm? Earnings are expected to:

A-increase
B-decrease
C-remain relatively stable

SImply lost by this question. Could you please explain the question with some no. and some analysis.

I thanks you friend

 

[Spongebob]

Valuation allowance increasing means that NTA falls. The company expects lower future profits. It doesn't feel it can actually realize these tax assets.

Where is this question from?

 

[ansumania]

This is from Schweser and the answer is B.

Please elaborate. Thanks my friend.