Arnold Industries has pretax accounting income of $160 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 $136 million advance rent payment at the inception of the lease is tax-deductible in 2024 but, for financial reporting purposes, represents prepaid rent expense to be recognized equally over the four-year lease term. Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following tablegiven below to record Arnold's income taxes for 2025.Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). Amounts to be deducted should beindicated with a minus sign.Temporary Difference - Beginning of YearTemporary Difference - End of YearChange in Deferred Tax accountIncome taxable in current year($ in millions)$$X102.0 x244.0 XTax Rate %25% =15% =25% =$$$Tax $Recorded as:0.0 Deferred tax liability-beginning15.3 Deferred tax liability-endingChange in deferred tax liability61.0 Income tax payableShow less

Taxable Income: The taxable income, which determines the amount of income tax to be paid, is…

Answered: Arnold Industries has pretax accounting…

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

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 to record Arnold's income taxes for 2025.
Note: 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.
Temporary Difference - Beginning of Year
Temporary Difference - End of Year
Change in Deferred Tax account
Income taxable in current year
($ in millions)
$
$
X
102.0 x
244.0 X
Tax Rate %
25% =
15% =
25% =
$
$
$
Tax $
Recorded as:
0.0 Deferred tax liability-beginning
15.3 Deferred tax liability-ending
Change in deferred tax liability
61.0 Income tax payable
Show less

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