Sodhan Inc. reported the following for 2021 and 2022 ($in millions):

2021

2022

Revenues

$888

$980

Expenses

760

800

Pretax accounting income

$128

$180

Taxable income

$116

$200

Tax rate 25%

a.Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2021 for $60 million. The cost is tax deductible in 2021.

b.Expenses include $2 million insurance premiums each year for life insurance on key executives, which is no tax deductible.

c.Sodhan sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $33 million and $35 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenue were $25 million and $33 million.

d.2021 expenses included a $14 unrealized loss from reducing investments to fair value. The investment were sold and loss realized (tax deductible) in 2022.

e.During 2020, accounting income included an estimated loss of $6 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible.

f.At January 1, 21, Sodhan had a deferred tax asset of $4 million and no deferred tax liability.

Required:

1.Prepare the appropriate journal entry related to income tax for 2021, and 2022.

2.Suppose that during 2022, tax legislation was passed that will lower Sodhan's effective tax rate to 15% beginning in 2023, repeat requirement 1.