Arnold Industries has pretax accounting income of $88 million for the year ended December 31, 2024. 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, 2024. An $64 million advance rent payment at the inception of the lease is tax-deductible in 2024 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 2024. 2. Prepare the appropriate journal entry to record Arnold's income taxes for 2025. Pretax accounting income was $120 million for the year ended December 31, 2025. 3. Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following table given below and prepare the appropriate 2015
Arnold Industries has pretax accounting income of $88 million for the year ended December 31, 2024. 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, 2024. An $64 million advance rent payment at the inception of the lease is tax-deductible in 2024 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 2024. 2. Prepare the appropriate journal entry to record Arnold's income taxes for 2025. Pretax accounting income was $120 million for the year ended December 31, 2025. 3. Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following table given below and prepare the appropriate 2015
Chapter26: Tax Practice And Ethics
Section: Chapter Questions
Problem 32P
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Transcribed Image Text:Arnold Industries has pretax accounting income of $88 million for the year ended December 31,
2024. 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, 2024. An $64 million advance rent payment at the inception of the lease is tax-deductible in
2024 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 2024.
2. Prepare the appropriate journal entry to record Arnold's income taxes for 2025. Pretax
accounting income was $120 million for the year ended December 31, 2025.
3. Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15%
beginning in 2026. Complete the following table given below and prepare the appropriate
journal entry to record Arnold's income taxes for 2025.
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