Exercise 16-18 (Static) Change in tax rates; calculate taxable income [LO16-2,16-6]

Arnold Industries has pretax accounting income of $32 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 $8 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.

Complete this question by entering your answers in the tabs below.

• Required 1 Calculation
• Required 1 GJ
• Required 2
• Required 3 Calculation
• Required 3 GJ

Complete the following table given below to record Arnolds income taxes for 2021. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

	($ in millions)		Tax Rate %		Tax $	Recorded as:
Pretax accounting income	$32.0
Rent costs reversing in:
2022		x		=
2023		x		=
2024		x		=
2025		x		=
Total deferred tax amount					$0.0
Income taxable in current year	$32.0	x		=

Prepare the appropriate journal entry to record Arnolds income taxes for 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 5,000,000 should be entered as 5).)

Journal entry worksheet

• Record 2021 income taxes.
• Record 2022 income taxes.

Note: Enter debits before credits.

Event	General Journal	Debit	Credit
1

Assume a new tax law is enacted in 2022 that causes the tax rate to change from 25% to 15% beginning in 2023. Complete the following table given below to record Arnolds income taxes for 2022. (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.)

	($ 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		=	$0.0

Prepare the appropriate journal entry to record Arnolds income taxes for 2022. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Journal entry worksheet

• Record 2022 income taxes.

Note: Enter debits before credits.

Event	General Journal	Debit	Credit
1