Arnold Industries has pretax accounting income of $144 million for the year ended December 31, 2021. 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, 2021. An $120 million advance rent payment at the inception of the lease is tax-deductible in 2021 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 Arnolds income taxes for 2021.

NEED BLANKS. WHAT I HAVE SO FAR IS CORRECT:

Income tax expense ______ Debit

Deferred tax liability _______ Credit

Income tax payable. _______ Credit

2. Prepare the appropriate journal entry to record Arnolds income taxes for 2022. Pretax accounting income was $190 million for the year ended December 31, 2022.

NEED BLANKS. WHAT I HAVE SO FAR IS CORRECT:

Income tax epene ______ Debit

Deferred tax liability ______ Debit

Income tax payable 55.00 (in millions) Credit