2. Arnold Industries has pretax accounting income of $56 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 $32 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: Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2024. Prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Pretax accounting income was $80 million for the year ended December 31, 2025. 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.
2. Arnold Industries has pretax accounting income of $56 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 $32 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: Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2024. Prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Pretax accounting income was $80 million for the year ended December 31, 2025. 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.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter20: Accounting For Leases
Section: Chapter Questions
Problem 4P: Lessee Accounting Issues Timmer Company signs a lease agreement dated January 1, 2019, that provides...
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Immediate Accounting ll Ch 16
2. Arnold Industries has pretax accounting income of $56 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 $32 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:
- Complete the following table given below and prepare the appropriate
journal entry to record Arnold’s income taxes for 2024. - Prepare the appropriate journal entry to record Arnold’s income taxes for 2025. Pretax accounting income was $80 million for the year ended December 31, 2025.
- Assume a new tax law is enacted in 2025 that causes the tax rate to change from 25% to 15% beginning in 2026. Complete the following table given below and prepare the appropriate journal entry to record Arnold’s income taxes for 2025.
- Required 1 Calculation
| ($ in million) | Tax Rate % | Tax | Recorded as | |||
| Pretax accounting income | $56.0 | |||||
| Rent costs reversing in: | ||||||
| 2025 | ? | x | ? | = | ||
| 2026 | ? | x | ? | = | ||
| 2027 | ? | x | ? | = | ||
| 2028 | ? | x | ? | = | ||
| Total |
$ 0.0 | ? | ||||
| Income taxable in current year | $ 56.0 | x | ? | = | ? |
- Required 1 GJ
Record the income taxes for 2024
| Transaction | General Journal | Debit | Credit |
| 1 | |||
- Required 2
Record 2025 Income taxes
| Transaction | General Journal | Debit | Credit |
| 1 | |||
- Required 3 Calculation
| ($ in millions) | Tax Rate % | Tax $ | Recorded as: | |||
| Temporary Difference - Beginning of Year | x | ? | = | $0.0 | ? | |
| Temporary Difference - End of Year | x | ? | $0.0 | ? | ||
| Change in Deferred Tax account | ? | ? | ||||
| Income taxable in current year | x | ? | = | ? |
- Required 3 GJ
Record the income taxes for 2025
| Transaction | General Journal | Debit | Credit |
| 1 | |||
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