Toys R US reported pretax accounting income of $8 million for 2018 (calendar year). The following information relates to differences between pretax accounting income and taxable income:

1. Income from installment sales of properties included in pretax accounting income in 2018 were 8 million. For tax purposes installment sales were $4 million which represented cash collected during 2018. The installment receivable account at the beginning of the year and the end of the year 2018 had a balance of $2 million and $6 million, respectively. The year end 2018 balance represents the uncollected portions of 2017 and 2018 installment sales expected to be collected if future tax years.
2. Outside received insurance proceeds ($2 million) upon the death of an insured executive.
3. Outside rents its operating facilities but owns one asset acquired in 2017 at a cost of $80 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but less than straight-line depreciation the next two years ($ in millions):

Income Statement Tax Return Difference

2017 $20 $29 $(9)

2018 $20 32 (12)

2019 $20 12 8

2020 $20 7 13

$80 $80 $0

4. Warranty expense of $5 million is reported in 2018. For tax purposes, the expense is deducted when costs are incurred, which was $7 million in 2018. At December 31, 2018, the warranty liability was $1 million (after adjusting entries). The balance was $3 million at the end of 2017.

5. On 12/31/18, Outside prepaid ($2 million) next years (2019) rent for operating facilities. This item is fully deductible for 2018 tax purposes. GAAP books recorded the payment as a current asset on 12/31/18. This was the first year that Outside had prepaid its rents.

6. During 2018, accounting income included an estimated loss of $3 million related to the accrual of a loss contingency. The loss will be paid in 2019, at which time it is tax deductible.

Balances in the deferred tax asset and deferred tax liability accounts at January 1, 2018, were $1.2 million and $4.4 million, respectively. The enacted tax rate is 40% for past and present tax years. During 2018, the Federal Government enacted into law lower tax rates for all future years (2019 and beyond). The new tax rate is 31%.

Required:

1. Determine the amounts necessary to record income taxes (the income tax provision) for 2018 and prepare the appropriate journal entry. Prepare an Income Tax Provision worksheet
2. What is the 2018 net income? Show your calculations.