**Accounting Tax Analysis for Barry Transport Company****Scenario:**As the new accounting manager at Barry Transport Company, you have been asked to provide insights on the company’s income tax position based on the following data for the year ended December 31, 2021:1. **Income Details:** - Pretax accounting income: $50 million - Taxable income: $6 million2. **Differences Explained:** - **Depreciation Discrepancy:** - Tax depreciation exceeds book depreciation by $40 million in 2021 for a recently acquired business complex. - Scheduled reversals: $60 million in 2022, reversals of $50 million in both 2023 and 2024. - **Insurance Payment:** - $8 million paid in 2021 for 2022 coverage. - **Loss Contingency:** - A $4 million loss accrued in 2021 to be paid in 2023.3. **Initial Conditions:** - No temporary differences at the beginning of 2021.4. **Tax Rate:** - Currently at 25%.**Tasks:**1. **Income Tax Record for 2021:** - Determine required amounts and prepare the necessary journal entries.2. **Tax Rate Adjustment:** - Assume a change in the federal income tax rate from 25% to 20% in 2023. - Address the scheduling of depreciation reversals while acknowledging continued origination in 2022, with PricewaterhouseCoopers’ *Comperio* database as a reference. - Reference: **.441 Depreciable and Amortizable Assets** - Only schedule reversals at the balance sheet date. - Future originations do not determine the reversal pattern. - FIFO pattern is intended for the timing of reversals.*Guidance Interpretation:*When future amounts are scheduled and a portion of a temporary difference has not originated, only schedule the existing differences' reversals at the balance sheet date. Multiply by the tax rate effective when differences reverse. Future originations do not affect the timing of reversals.**Action Required:**Calculate the necessary amounts to record income taxes for 2021 and document the corresponding journal entries.

Accounting Income and Taxable Income: Accounting income is calculated using the regular GAAP…

You are the new accounting manager at the Barry Transport Company. Your CFO has asked you to provide input on the company's income tax position based on the following: 1. Pretax accounting income was $50 million and taxable income was $6 million for the year ended December 31, 2021. 2. The difference was due to three items: a. Tax depreciation exceeds book depreciation by $40 million in 2021 for the business complex acquired that year. This amount is scheduled to be $60 million in 2022 and to reverse as ($50 million) and ($50 million) in 2023 and 2024, respectively. b. Insurance of $8 million was paid in 2021 for 2022 coverage. c. A $4 million loss contingency was accrued in 2021, to be paid in 2023. 3. No temporary differences existed at the beginning of 2021. 4. The tax rate is 25%. Required: 1. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry. 2. Assume the enacted federal income tax law specifies that the tax rate will change from 25% to 20% in 2023. When scheduling the reversal of the depreciation difference, you were uncertain as to how to deal with the fact that the difference will continue to originate in 2022 before reversing the next two years. Upon consulting PricewaterhouseCoopers' Comperio database, you found: .441 Depreciable and amortizable assets Only the reversals of the temporary difference at the balance sheet date would be scheduled. Future originations are not considered in determining the reversal pattern of temporary differences for depreciable assets. FAS 109 [FASB ASC 740-Income Taxes] is silent as to how the balance sheet date temporary differences are deemed to reverse, but the FIFO pattern is intended. You interpret that to mean, when future taxable amounts are being scheduled, and a portion of a temporary difference has yet to originate, only the reversals of the temporary difference at the balance sheet date can be scheduled and multiplied by the tax rate that will be in effect when the difference reverses. Future originations (like the depreciation difference the second year) are not considered when determining the timing of the reversal. For the existing temporary difference, it is assumed that the difference will reverse the first year the difference begins reversing. Determine the amounts necessary to record income taxes for 2021, and prepare the appropriate journal entry.