Arnold Industries has pretax accounting income of $88 million for the year ended December 31, 2021. The tax rate is 25%. The only difference between accounting income and taxable income relates to an operating lease in which Arnold is the lessee. The inception of the lease was December 28, 2021. An $64 million advance rent payment at the inception of the lease is tax-deductible in 2021 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over the four-year lease term.Required:1. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2021.2. Prepare the appropriate journal entry to record Arnold’s income taxes for 2022. Pretax accounting income was $120 million for the year ended December 31, 2022.3. Assume a new tax law is enacted in 2022 that causes the tax rate to change from 25% to 15% beginning in 2023. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2022. Required 1CalculationRequired 2Required 3CalculationRequired 1 GJRequired 3 GJComplete the following table given below to record Arnold's income taxes for 2021. (Enter your answers in millions rounded to 1 decimalplace (i.e., 5,500,000 should be entered as 5.5).)($ in millions)Tax Rate %Тax $Recorded as:Pretax accounting income$88.0Rent costs reversing in:20222023X2024X2025Total deferred tax amount$0.0Income taxable in current year$88.0 x Required 1CalculationRequired 3CalculationRequired 1 GJRequired 2Required 3 GJAssume a new tax law is enacted in 2022 that causes the tax rate to change from 25% to 15% beginning in 2023. Complete the following tablegiven below to record Arnold's income taxes for 2022. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be enteredas 5.5). Amounts to be deducted should be indicated with a minus sign.)($ in millions)Tax Rate %Tax $Recorded as:Temporary Difference - Beginning of Year0.0Temporary Difference - End of Year$40.0Change in Deferred Tax accountIncome taxable in current year$0.0

Solution: Taxable income is the income on which income tax is to be paid and it is computed by…

Answered: Arnold Industries has pretax accounting…

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter3: Taxes On The Financial Statements

Section: Chapter Questions

Problem 4RP

See similar textbooks

Related questions

Question

Arnold Industries has pretax accounting income of $88 million for the year ended December 31, 2021. The tax rate is 25%. The only difference between accounting income and taxable income relates to an operating lease in which Arnold is the lessee. The inception of the lease was December 28, 2021. An $64 million advance rent payment at the inception of the lease is tax-deductible in 2021 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over the four-year lease term.

Required:
1. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2021.
2. Prepare the appropriate journal entry to record Arnold’s income taxes for 2022. Pretax accounting income was $120 million for the year ended December 31, 2022.
3. Assume a new tax law is enacted in 2022 that causes the tax rate to change from 25% to 15% beginning in 2023. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2022.

Required 1
Calculation
Required 2
Required 3
Calculation
Required 1 GJ
Required 3 GJ
Complete the following table given below to record Arnold's income taxes for 2021. (Enter your answers in millions rounded to 1 decimal
place (i.e., 5,500,000 should be entered as 5.5).)
($ in millions)
Tax Rate %
Тax $
Recorded as:
Pretax accounting income
$
88.0
Rent costs reversing in:
2022
2023
X
2024
X
2025
Total deferred tax amount
$
0.0
Income taxable in current year
$
88.0 x

Required 1
Calculation
Required 3
Calculation
Required 1 GJ
Required 2
Required 3 GJ
Assume a new tax law is enacted in 2022 that causes the tax rate to change from 25% to 15% beginning in 2023. Complete the following table
given below to record Arnold's income taxes for 2022. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered
as 5.5). Amounts to be deducted should be indicated with a minus sign.)
($ in millions)
Tax Rate %
Tax $
Recorded as:
Temporary Difference - Beginning of Year
0.0
Temporary Difference - End of Year
$4
0.0
Change in Deferred Tax account
Income taxable in current year
$
0.0

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.