Amold Industries has pretax accounting income of $28 million for the year ended

Question

Amold Industries has pretax accounting income of $28 million for the year ended December 31, 2016 The tax rate s 30% The only diference between accounting income and taxable ncome relates to an operating ease in which Amold is the lessee The inception of the lease was December 28, 2016 An $8 million advance rent payment at the inception of the lease is tax-deductible in 2016 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 Anold's ncome taxes for 2016 (If no entry is required for a transactionievent, select No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place 5.500,000 should be entered as 55)) Pretax accounting income Rent costs reversing in 280 2017 2018 2019 2020 Total deferred tax amount income taxable in curment year s 280x

Explanation / Answer

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Journal Entry Worksheet

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($ in million) Tax Rate % Tax $ Recorded As Pretax Accounting Income 28.0 X 30% = 8.4 Income Tax Expenses Rent Cost Reversing in 2017 2.0 X 30% = 0.6 2018 2.0 X 30% = 0.6 2019 2.0 X 30% = 0.6 2020 2.0 X 30% = 0.6 Total Deferred tax amount 8.0 X 30% = 2.4 Deferred Tax Liability Income taxable in current year 20.0 X 30% = 6.0 Income Tax Payable

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