Prepare journal entry to record Arnold income taxes

Reference no: EM132729104

Question - Arnold Industries has pretax accounting income of $144 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 $120 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. Prepare the appropriate journal entry to record Arnold's income taxes for 2021.

2. Prepare the appropriate journal entry to record Arnold's income taxes for 2022. Pretax accounting income was $190 million for the year ended December 31, 2022.

3. Assume a new tax law is enacted in 2022 that causes the tax rate to change from 25% to 15% beginning in 2023. Prepare the appropriate journal entry to record Arnold's income taxes for 2022.

Reference no: EM132729104

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