Arndt, Inc., reported the following for 2016 and 2017 ($ in millions): 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 2016.(image attached with question!!)
Arndt, Inc., reported the following for 2016 and 2017 ($ in millions): 2016 2017 S996 $1,031 24 24 Pretax accounting income $972 $1,007 $970 $1,030 (income statement) Taxable income (tax return) Tax rate: 40% a. Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2016 for $60 million. The cost is tax deductible in 2016. Expenses include $3 million insurance premiums each year for life insurance on key executives. b. c. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2016 and 2017 were $36 million and $48 million, respectively. Subscriptions included in 2016 and 2017 financial reporting revenues were $28 million ($10 million collected in 2015 but not earned until 2016) and $36 million, respectively. Hint: View this as two temporary differences-one reversing in 2016; one originating in 2016. d. 2016 expenses included a $22 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2017. e. During 2015, accounting income included an estimated loss of $5 million from having accrucd a loss contingency. The loss was paid in 2016 at which time it is tax deductible At January 1, 2016, Arndt had a deferred tax asset of $7 million and no deferred tax liability. value: 20.00 points 2. 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 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions(i.e, 10,000,000 should be entered as 10).) Taxable Amounts ductible (S in millions) Year 2016 Amounts 2017 Pretax accounting income Permanent difference Life insurance premiums Temporary differences Casualty insurance expense Subscriptions-2015 Subscriptions-2016 Unrealized loss Loss contingenc Taxable income Enacted tax rate Enacted tax rate (% Tax payable current Deferred tax liabilit Deferred tax asset Deferred tax Deferred tax liabilit asset Ending balances (balances currently needed Less: Beginning balances Changes needed to achieve desired balances 0
