Wilson Development Inc sells plots of land for industrial development. Wilson recognizes income for financial purposes in the year it sells the plots. For some of the plots sold this year, Willison 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 sale in 2022 and 40% in 2023.

This amount over the next two years is as follows:

2022$30 million

2023$20 million

Total$50 million

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Wilson's accounting income for 2021 was $115 million.In its income statement, Wilson reported interest income of $15 million, unrelated to the sale of land, for which the company's position is the interest is 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. The enacted tax rate is 40%.

Management believes the tax position taken on the land sale has a greater 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 forPercentage likelihood of

Installment sales treatmentTax treatment being sustained

$5020%

$4020%

$3020%

$2020%

$1020%

Required:

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

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

3-A) what portion of the $50 million income from the plots sold on an installment basis will Wilson defer on its 2021?

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

4)Do the journal entry to record income taxes in 2021, assuming full recognition of 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 indicated in requirement 1-3.

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

Req 1-3Req 4Req 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 Wilson defer its 2021 tax return and deferred tax asset or liability in 2021 financial statements ( inter the answers in millions (I.e.,10,000,000 should be entered as 10).)

1

1) Tax benefits recognized___________ $ 6________ In millions

2)Tax benefits recognized _________ __$ 0________ In millions

3A) Amount deferred ____________ $ 20_______ In millions

3B) Deferred Tax liability _____________ $12_________ In millions

Req 1-3Req 4Req 5

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

Journal entry worksheet

1

Record 2021 Income tax

Transaction Journal entry Debit Credit

1

Income Tax expense 40

Income tax payable 20

Deferred Tax Liability 20

Req 1-3Req 4Req 5

work on the journal entry to record income tax in 2021, assuming the tax benefits' recognition in the financial statements you indicated in requirement 1-3.

Journal entry worksheet

1

Record 2021 Income taxes

Transaction Journal entry Debit Credit

1

Income Tax Expense OK ?????

OKDeferred Tax Liability OK 12Ok

OKIncome tax payable OK 20OK

OK Liability-Uncertain tax Position OK ????

?

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