Arlington Co. reported income before income taxes of $10,000,000 for the year ending December 31, 2021. You learned the following related to the company's income taxes:

- Tax depreciation will be $500,000 more than GAAP depreciation.

- The company received a customer deposit in December 2021 for work to be started and completed next year. The deposit was $125,000, which is taxable when received.

- The company discovered an issue with hazardous waste which it reported (as required) to the federal EPA. A fine of $1,200,000 was paid. Fines are not tax deductible.

- Of the $10 millions of income before tax, $875,000 was earned in an enterprise zone and is not subject to federal tax. (Not this year and not in the future, either.)

- The company spent $250,000 on meals and entertainment expense, half of which is not tax deductible (this may be different from current tax regulations, but this isn't a tax course so assume that is correct).

- The federal statutory tax rate is 21%, there are no other taxes that need to be considered.

Required:

For all responses, put your answer in the box provided below. Show your work on the spreadsheet, the answer alone is not sufficient.

- Calculate the company's tax provision/expense for the year 2021.

- Calculate the company's tax liability for the year 2021.

- Calculate any deferred tax assets the company should record (in total, no detail).

- Calculated any deferred tax liabilities the company should record (in total, not detail).

- Reconcile the company's effective tax rate to the statutory rate of 21% (show you calculations to a tenth of a percent, as 21.0%).

- If a goal of management is to reduce the effective tax rate, what is one action that could be taken to accomplish that? Just one.

Tax provision/expense =

Tax liability(taxes payable) =

Deferred tax asset(s) =

Deferred tax liability(ies) =

Effective tax rate reconciliation Feceral statutory rate 21.0%

Effective tax rate =