Willson Development Inc sells plots of land for industrial development. Willson recognizes income for financial purposes in the year it sells the plots. For some of the plots sold this year, Willison took the position it could recognize the income for tax purposes when the installments are collected. Wilson recognized income for financial reporting in purposes 2021 for plots in this category was $50 million. The company expected to collect 60% of each salein2022 and 40% in 2023.

This amount over the next two years is as follows:

2022 $30 million

2023 $20 million

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Total $50 million

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Willson's accounting income for 2021 was $115 million.In its income statement, Willson reported interest income of $15 million, unrelated to the sale of land, for which the company's position is theinterestis not taxable. Accordingly, the interest was not reported on the tax returns. There are no differences between accounting income and taxable income other than those disclosed above. Theenactedtax rate is 40%.

Management believes the tax position taken on the land salehas agreater than 50% chance of being upheld based on its technical merits, but the position taken on the interest has a less than 50% chance of being upheld. It is further believed that the following likelihood percentage applies to the tax treatment of land sales ($ in a million)

Amount qualifying for Percentage likelihood of

Installment sales treatment Taxtreatmentbeing sustained

$50 20%

$40 20%

$30 20%

$20 20%

$10 20%

Required:

1)What portion of the taxbenefitof tax-free interest will Wilson recognize on its 2021 tax return?

2)What portion of the tax benefits of tax-free interest will Willsonrecognizeon its 2021financial statement

3-A) whatportion of the $50 million income from the plots sold on an installment basis will Willsondeferon its 2021?

3-B) whatportion of the tax on the $50 million income from the plots sold on an installment basis will Willson show deferred tax asset or deferred tax liability in its2021 financial statement?

4)Do the journal entry to record income taxes in 2021,assumingfullrecognitionof the tax benefits in the financial statement of both differences between pretax accounting income and taxable income.

5)work on the journal entry to record income tax in 2021, assuming the tax benefits' recognition in the financial statements you indicatedin requirement1-3.

Complete the question below. Enter the answers in the table below.

Req 1-3 Req 4 Req 5

What portion of the tax-free interest tax benefits will Wilson recognize on its 2021 tax return and financial statements?

What portion of the tax on the $50 billion income from the land sold on an installment basis will Willson defer its 2021 tax return and deferred tax asset or liability in 2021 financial statements(intertheanswers in millions (I.e.,10,000,000 should be entered as 10).)

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1 Tax benefits recognized________________-- In millions

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2 Tax benefits recognized___________________In millions

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3A Amount deferred________________________In millions

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3B In millions

Req 1-3 Req 4 Req 5

4) Do the journal entry to record income taxes in 2021,assumingfullrecognitionof the tax benefits in the financial statement of both differences between pretax accounting income and taxable income.

Journal entry worksheet

1

Record 2021Incometax

Transaction Journal entry Debit Credit

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Req 1-3 Req 4 Req 5

Work on the journal entry to record income tax in 2021, assuming the tax benefits' recognition in the financial statements you indicatedin requirement1-3.

Journal entry worksheet

1

Record 2021 Income taxes

 Transaction Journal entry Debit Credit 

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