Question
Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 930 $ 1,022 Expenses 786 842 Pretax accounting income
Arndt, Inc. reported the following for 2021 and 2022 ($ in millions):
| 2021 |
| 2022 | ||||
Revenues | $ | 930 |
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| $ | 1,022 |
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Expenses |
| 786 |
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| 842 |
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Pretax accounting income (income statement) | $ | 144 |
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| $ | 180 |
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Taxable income (tax return) | $ | 114 |
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| $ | 214 |
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Tax rate: 25% |
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- Expenses each year include $48 million from a two-year casualty insurance policy purchased in 2021 for $96 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 $49 million and $65 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $43 million ($28 million collected in 2020 but not recognized as revenue until 2021) and $49 million, respectively. Hint: View this as two temporary differencesone reversing in 2021; one originating in 2021.
- 2021 expenses included a $32 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 $22 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 $4 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.
Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)
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Note: Enter debits before credits.
Record 2022 Income Taxes | |||||||||||||||||||||||||||||
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