Problem 1

ABC Co. establishes a liability at the end of 2020 for the estimated
litigation settlement for manufacturing defects of:	$ 150,000,000
All related costs will be paid and deducted on the tax return in 2021.
Also, at the end of 2020, the company has:
Temporary differences due to excess depreciation for tax purposes	$ 70,000,000
The amount of the temporary differences to be reversed in 2021	$ 12,000,000
The enacted tax rate for all years is:	25%
In 2020, the company paid taxes of	$ 30,000,000
ABC expects to have taxable income in 2021.
Assume that the only deferred tax account at the beginning of 2020 was
a deferred tax liability of	$ 6,500,000
Draft the income tax expense portion of the income statement for 2020.