Arnold Industries has pretax accounting income of $56 million for the year ended December 31, 2021....

Arnold Industries has pretax accounting income of $56 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 $32 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 $80 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.

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 %		Tax $	Recorded as:
Pretax accounting income	$56.0
Rent costs reversing in:
2022		x		=
2023		x		=
2024		x		=
2025		x		=
Total deferred tax amount
Income taxable in current year		x		=

	($ in millions)		Tax Rate %		Tax $	Recorded as:
Temporary Difference - Beginning of Year		x		=
Temporary Difference - End of Year		x		=
Change in Deferred Tax account
Income taxable in current year		x		=

Expert Solution

ekkarill92 answered 1 year ago

Arnold Industries has pretax accounting income of $32 million for the year ended December 31, 2021....

Arnold Industries has pretax accounting income of $32 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 $8 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...

Arnold Industries has pretax accounting income of $160 million for the year ended December 31, 2021....

Arnold Industries has pretax accounting income of $160 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 $136 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...

Arnold Industries has pretax accounting income of $40 million for the year ended December 31, 2018....

Arnold Industries has pretax accounting income of $40 million for the year ended December 31, 2018. The tax rate is 40%. 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, 2018. An $20 million advance rent payment at the inception of the lease is tax-deductible in 2018 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over...

Arnold Industries has pretax accounting income of $62 million for the year ended December 31, 2018....

Arnold Industries has pretax accounting income of $62 million for the year ended December 31, 2018. The tax rate is 40%. 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, 2018. An $12 million advance rent payment at the inception of the lease is tax-deductible in 2018 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over...

For the year ended Dec 31, 2021, Arndt Inc. reported pretax accounting income of $700 million....

For the year ended Dec 31, 2021, Arndt Inc. reported pretax accounting income of $700 million. Select information is listed below: 1) The company begins selling one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 were $530 million. Subscriptions included in 2021 for financial reporting revenues were $470 million. 2) In 2020, the company purchased a piece of equipment with a cost of $500 million. For financial reporting purposes, the company used the straight-line method over...

For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,052,000. Selected...

For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,052,000. Selected information for 2021 from Fidelity’s records follows: Interest income on municipal governmental bonds $ 108,000 Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement 132,000 Carrying amount of depreciable assets in excess of their tax basis at year-end 240,000 Warranty expense reported on the income statement 64,000 Actual warranty expenditures in 2021 54,000 Fidelity's income tax rate is...

For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,048,000. Selected...

For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $1,048,000. Selected information for 2021 from Fidelity’s records follows: Interest income on municipal governmental bonds $ 104,000 Depreciation claimed on the 2021 tax return in excess of depreciation on the income statement 128,000 Carrying amount of depreciable assets in excess of their tax basis at year-end 232,000 Warranty expense reported on the income statement 62,000 Actual warranty expenditures in 2021 52,000 Fidelity's income tax rate is...

tanhope, Inc. Reconciliation of Pretax Accounting Income to Taxable Income Year ended December 31, year 2...

tanhope, Inc. Reconciliation of Pretax Accounting Income to Taxable Income Year ended December 31, year 2 Pretax accounting income $678,000 Expenses recorded on books this year not deductible for tax purposes: Meals and entertainment expenses 12,000 Bad debts expense provision 15,000 27,000 Subtotal 705,000 Income recorded on books this year not subject to tax: Tax-exempt interest income 15,000 Unrealized gain (loss) on trading securities 8,000 Deductions on tax return not charged against book income this year: Depreciation expense 63,000 Bad...

For the year ended December 31, 2021, Norstar Industries reported net income of $655,000. At January...

For the year ended December 31, 2021, Norstar Industries reported net income of $655,000. At January 1, 2021, the company had 900,000 ordinary shares outstanding. The following changes in the number of shares occurred during 2021: April 30 Sold 60,000 shares in a public offering. May 24 Declared and distributed a bonus issue of 5%. June 1 Issued 72,000 shares as part of the consideration for the purchase of assets from a subsidiary. Required: Compute Norstar's earnings per share for...

For the year ended December 31, 2018, Southern Atlantic Distributors reported pretax accounting income of $975,000....

For the year ended December 31, 2018, Southern Atlantic Distributors reported pretax accounting income of $975,000. Selected information for 2018 from Southern Atlantic Distributors’ records follows: Interest income on municipal bonds (tax-free income) $35,000 Insurance expense representing 25% of a $180,000, $45,000 4-year insurance policy that was deducted for tax purposes in 2018 when it was purchased. The policy expires at the end of 2021. Rental revenue reported in the income statement, which $75,000 does not include an additional $25,000...

Question