Immediate Accounting ll Ch 16 2. Arnold Industries has pretax accounting income of $56 million for the year ended December 31, 2024. 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, 2024. An $32 million advance rent payment at the inception of the lease is tax-deductible in 2024 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over the four-year lease term.Required:Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2024.Prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Pretax accounting income was $80 million for the year ended December 31, 2025.Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Required 1 Calculation ($ in million) Tax Rate % TaxRecorded as Pretax accounting income$56.0 Rent costs reversing in: 2025?x?= 2026?x?= 2027?x?= 2028?x?= Total deferred tax amount $ 0.0?Income taxable in current year$ 56.0x?= ? Required 1 GJRecord the income taxes for 2024Transaction General JournalDebitCredit1 Required 2Record 2025 Income taxesTransaction General JournalDebitCredit1 Required 3 Calculation ($ in millions) Tax Rate % Tax $Recorded as:Temporary Difference - Beginning of Year x?=$0.0?Temporary Difference - End of Year x? $0.0?Change in Deferred Tax account ??Income taxable in current year x?= ? Required 3 GJRecord the income taxes for 2025Transaction General JournalDebitCredit1

Taxes that are due but won't need to be paid until later are recorded as deferred tax liability on a company's balance sheet. Because of the timing discrepancy between when the tax was accrued and when it is scheduled to be paid, the responsibility is delayed.1. Calculation: Formula: Interpretation: Record the income taxes for 2024: 2. Record 2025 Income taxes Formula: Interpretation: 3. Calculation: Formula: Interpretation: Record the income taxes for 2025: Formula: Interpretation:

Answered: 2. Arnold Industries has pretax…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Required:

Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2024.
Prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Pretax accounting income was $80 million for the year ended December 31, 2025.
Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2025.

Required 1 Calculation

	($ in million)		Tax Rate %		Tax	Recorded as
Pretax accounting income	$56.0
Rent costs reversing in:
2025	?	x	?	=
2026	?	x	?	=
2027	?	x	?	=
2028	?	x	?	=
Total deferred tax amount					$ 0.0	?
Income taxable in current year	$ 56.0	x	?	=		?

Required 1 GJ

Record the income taxes for 2024

Transaction	General Journal	Debit	Credit
1

Required 2

Record 2025 Income taxes

Transaction	General Journal	Debit	Credit
1

Required 3 Calculation

	($ in millions)		Tax Rate %		Tax $	Recorded as:
Temporary Difference - Beginning of Year		x	?	=	$0.0	?
Temporary Difference - End of Year		x	?		$0.0	?
Change in Deferred Tax account					?	?
Income taxable in current year		x	?	=		?