Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Arndt, Inc. reported the following for 2 0 2 1 and 2 0 2 2 ( $ in millions ) : 2 0 2 1

Arndt, Inc. reported the following for 2021 and 2022($ in millions): 20212022Revenues $ 958 $ 1,008 Expenses 788814 Pretax accounting income (income statement) $ 170 $ 194 Taxable income (tax return) $ 137 $ 221 Tax rate: 25% Expenses each year include $51 million from a two-year casualty insurance policy purchased in 2021 for $102 million. The cost is tax deductible in 2021. Expenses include $2 million insurance premiums each year for life insurance on key executives. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $47 million and $49 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $39 million ($24 million collected in 2020 but not recognized as revenue until 2021) and $47 million, respectively. Hint: View this as two temporary differencesone reversing in 2021; one originating in 2021.2021 expenses included a $28 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold and the loss realized in 2022. During 2020, accounting income included an estimated loss of $20 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible. At January 1,2021, Arndt had a deferred tax asset of $11 million and no deferred tax liability.4. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2022

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Using Financial Accounting Information The Alternative to Debits and Credits

Authors: Gary A. Porter, Curtis L. Norton

10th edition

978-1337276337, 1337276332, 978-1337517546, 1337517542, 978-1337491471

More Books

Students also viewed these Accounting questions

Question

Describe two interpretations of shadow prices. lop4

Answered: 1 week ago