PLEASE ANSWER EACH QUESTION WITH THE REQUIRED CALCULATION
Ayres Services acquired an asset for $118 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows: Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income 2018 $ 425 29.5 (34.5) $ 420 ($ in millions) 2019 2020 $ 445 460 29.5 29.5 (42.5) (24.5) $ 432 $ 465 2021 495 29.5 (16.5) $ 508 Required: Determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "O" wherever applicable. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Beginning of 2018 End of 2018 End of 2019 End of 2020 End of 2021 Temporary Difference Deferred Tax Liability Arnold Industries has pretax accounting income of $70 million for the year ended December 31, 2018. The tax rate is 40%. 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, 2018. An $20 million advance rent payment at the inception of the lease is tax-deductible in 2018 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 Arnold's income taxes for 2018. 2. Prepare the appropriate journal entry to record Arnold's income taxes for 2019. Pretax accounting income was $58 million for the year ended December 31, 2019. 3. Assume a new tax law is enacted in 2019 that causes the tax rate to change from 40% to 30% beginning in 2020. Complete the following table given below and prepare the appropriate journal entry to record Arnold's income taxes for 2019. Complete this question by entering your answers in the tabs below. Required 1 Calculation Required 1 G Required 2 Required 3 Calculation Required 3 G) Complete the following table given below to record Arnold's income taxes for 2018. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Tax Rate % Tax $ Recorded as: ($ in millions) $ 70.0 Pretax accounting income Rent costs reversing in: 2019 2020 X 2021 X 2022 X $ 0.0 Total deferred tax amount Income taxable in current year $ 70.0 X = 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 Assume a new tax law is enacted in 2019 that causes the tax rate to change from 40% to 30% beginning in 2020. Complete the following table given below to record Arnold's income taxes for 2019. (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: X = 0.0 Temporary Difference - Beginning of Year Temporary Difference - End of Year Change in Deferred Tax account $ $ II = 0.0 Income taxable in current year = $ 0.0
