Question
Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): 2018 2019 Revenues $ 992 $ 1,046 Expenses 788 828 Pretax accounting income
Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): 2018 2019 Revenues $ 992 $ 1,046 Expenses 788 828 Pretax accounting income (income statement) $ 204 $ 218 Taxable income (tax return) $ 200 $ 240 Tax rate: 40% Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2018 for $60 million. The cost is tax deductible in 2018. 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 2018 and 2019 were $38 million and $48 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $30 million ($12 million collected in 2017 but not recognized as revenue until 2018) and $38 million, respectively. Hint: View this as two temporary differencesone reversing in 2018; one originating in 2018. 2018 expenses included a $20 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2019. During 2017, accounting income included an estimated loss of $4 million from having accrued a loss contingency. The loss was paid in 2018 at which time it is tax deductible. At January 1, 2018, Arndt had a deferred tax asset of $8 million and no deferred tax liability. Problem 16-8 Part 2 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 2018. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. prepare the necessary journal entry to record income taxes for 2018
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