Problem $4$

$(18$ points$)$

Ray Signs Inc.$\text{'}$s pretax accounting income was $$100$ million for the year ended December $31,2021.$ The taxable income difference was due to three items:

$1.$Tax depreciation exceeds book depreciation by $$30$ million in $2021$ for the assets acquired that year. Tax depreciation will exceed book depreciation by $$50$ million in $2022$ and to reverse as $($ $$40$ million$)$ and $($ $$40$ million$)$ in $2023$ and $2024,$ respectively.

$2.$Insurance of $$10$ million was paid in $2021$ for $2022$ coverage.

$3.$A $$6$ million loss contingency was accrued in $2021,$ to be paid in $2023.$

No temporary differences existed at the beginning of $2021.$ The tax rate is $15\%.$

a$.$ Determine the amounts necessary to record income taxes for $2021$ and prepare the appropriate journal entry. $(8$ points$)$

Workings: