Arndt, Inc, report the following for 2018 and 2019 ($ in millions):

2018 2019 Revenues $ 996 $1,031 Expenses 784 824 Pretax accounting income (income statement) $ 212 $ 207 Taxable income (tax return) $ 210 $ 230 Tax rate: 40%

a. Expenses each year include $30 million from a two-year casualty insurances policy purchased in 2018 for $60 million. The cost is tax deductible in 20818. b. Expenses include $3 million insurance premiums each year for life insurance on key executives. c. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2018 and 2019 were $36 million and $48 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $28 million ($10 million collected in 2017 but not recognized as revenue until 2018) and $36 million, respectively. Hint: View this as two temporary differences-one reversing in 2018: one originating in 2018. d. 2018 expenses included a $22 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2019. e. During 2017, accounting income included an estimated loss of $5million from having accrued a loss contingency. The loss was paid in 2018 at which time it is tax deductible. f. At January 1, 2018, Arndt had a deferred tax asset of $7 million and no deferred tax liability.

6. Suppose that during 2019 tax legislation was passed that will lower Arndts effective tax rate to 30% beginning in 2020. Prepare a schedule that reconciles that difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2019

($ in millions) Current Year 2019 Future Taxable Amounts [2020] Future Deductible Amounts [2020] Pretax accounting income Permanent difference: Life insurance premiums Temporary differences: Casualty insurance (reversing) Subscriptions 2018 Subscriptions-2019 Unrealized loss (reversing) Taxable income income tax return) 0 0 Enacted tax rate (%) Tax payable currently Deferred tax liability Deferred tax asset Deferred tax liability Deferred tax assets Ending balances (balances currently needed) Less: Beginning balances Changes needed to achieve desired balances Journal entry worksheet Record 2019 income taxes. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal Required 1 Required 2