2 Tru Developers, Incorporated, sells plots of land for industrial development. Tru recognizes income for financial reporting purposes inthe year it sells the plots. For some of the plots sold this year, Tru took the position that it could recognize the income for tax purposeswhen the installments are collected. Income that Tru recognized for financial reporting purposes in 2024 for plots in this category was$50 million. The company expected to collect 60% of each sale in 2025 and 40% in 2026. This amount over the next two years is asfollows:20252026$ 30 million20 million$50 millionTru's pretax accounting income for 2024 was $115 million. In its income statement, Tru reported interest income of $15 million,unrelated to the land sales, for which the company's position is that the interest is not taxable. Accordingly, the interest was notreported on the tax return. There are no differences between accounting income and taxable income other than those describedabove. The enacted tax rate is 40 percent.Management believes the tax position taken on the land sales has a greater than 50% chance of being upheld based on its technicalmerits, but the position taken on the interest has a less than 50% chance of being upheld. It is further believed that the followinglikelihood percentages apply to the tax treatment of the land sales ($ in millions):Amount Qualifying for InstallmentSales Treatment$ 5040Req 1 to 3302010Required:1. What portion of the tax benefit of tax-free interest will Tru recognize on its 2024 tax return?2. What portion of the tax benefit of tax-free interest will Tru recognize on its 2024 financial statements?3-a. What portion of the tax on the $50 million income from the plots sold on an installment basis will Tru defer on its 2024 tax return?3-b. What portion of the tax on the $50 million income from the plots sold on an installment basis will Tru show as a deferred tax assetor liability in its 2024 financial statements?4. Prepare the journal entry to record income taxes in 2024, assuming full recognition of the tax benefits in the financial statements ofboth differences between pretax accounting income and taxable income.5. Prepare the journal entry to record income taxes in 2024, assuming the recognition of the tax benefits in the financial statementsyou indicated in requirements 1-3.Complete this question by entering your answers in the tabs below.Req 4Percentage Likelihood of TaxTreatment Being Sustained20%20%20%20%20%Req 51 Tax benefit recognized2 Tax benefit recognized3a Amount deferred3b Deferred tax liabilityX Answer is not complete.1. to 3. What portion of the tax benefit of tax-free interest will Tru recognize on its 2024 tax return and financial statements?What portion of the tax on the $50 million income from the plots sold on an installment basis will Tru defer on its 2024 taxreturn and deferred tax asset or liability in its 2024 financial statements?Note: Enter your answers in millions (i.e., 10,000,000 should be entered as 10).$$$$6✔ million020millionmillion16 X millionShow less A

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Tru Developers, Incorporated, sells plots of land for industrial development. Tru recognizes income for financial reporting purposes in the year it sells the plots. For some of the plots sold this year, Tru took the position that it could recognize the income for tax purposes when the installments are collected. Income that Tru recognized for financial reporting purposes in 2024 for plots in this category was $50 million. The company expected to collect 60% of each sale in 2025 and 40% in 2026. This amount over the next two years is as follows: 2025 2026 $ 30 million 20 million $ 50 million Tru's pretax accounting income for 2024 was $115 million. In its income statement, Tru reported interest income of $15 million, unrelated to the land sales, for which the company's position is that the interest is not taxable. Accordingly, the interest was not reported on the tax return. There are no differences between accounting income and taxable income other than those described above. The enacted tax rate is 40 percent. Management believes the tax position taken on the land sales has a greater than 50% chance of being upheld based on its technical merits, but the position taken on the interest has a less than 50% chance of being upheld. It is further believed that the following likelihood percentages apply to the tax treatment of the land sales ($ in millions):

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q