Arnold Industries has pretax accounting income of $160 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 $136 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:

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 $210 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.