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 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 2018.

Complete the following table given below to record Arnold’s income taxes for 2018. (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	$40.0
Rent costs reversing in:
2019		x		=
2020		x		=
2021		x		=
2022		x		=
Total deferred tax amount
Income taxable in current year		x		=

Record 2018 income taxes

2. Prepare the appropriate journal entry to record Arnold’s income taxes for 2019. Pretax accounting income was $60 million for the year ended December 31, 2019.

3. Assume a new tax law is enacted in 2019 that causes the tax rate to change from 40% to 30% beginning in 2018. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2019.

Assume a new tax law is enacted in 2019 that causes the tax rate to change from 40% to 30% beginning in 2018. Complete the following table given below to record Arnold’s income taxes for 2019. (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:
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

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