Part 6 of 6 Required information Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate (LO16-4, 16-6, 16-8] [The following information applies to the questions displayed below.) points Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): Revenues Expenses Pretax accounting income (income statement) Taxable income (tax return) Tax rate: 40% 2018 $ 997 786 $ 211 $ 200 2019 $1,030 826 $ 204 $ 230 a. Expenses each year include $40 million from a two-year casualty insurance policy purchased in 2018 for $80 million. The cost is tax deductible in 2018. b. Expenses include $1 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 $37 million and $48 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $29 million ($11 million collected in 2017 but not recognized as revenue until 2018) and $37 million, respectively. Hint: View this as two temporary differences-one reversing in 2018; one originating in 2018. d. 2018 expenses included a $26 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 $6 million 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 $7 million and no deferred tax liability Problem 16-8 Part 6 6. Suppose that during 2019, tax legislation was passed that will lower Arndt's effective tax rate to 30% beginning in 2020. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2019 Required information Part 6 of 6 Required 1 Required 2 points Suppose that during 2019, tax legislation was passed that will lower Arndt's effective tax rate to 30% beginning in 2020. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Show less ($ in millions) Current Year 2019 Future Taxable Amounts [2020] Future Deductible Amounts [2020] 211 X Pretax accounting income Permanent difference: Life insurance premiums Temporary differences: Casualty insurance (reversing) Subscriptions2018 Subscriptions2019 Unrealized loss (reversing) Taxable income (income tax return) 40 X (40) X (11) 19 20 200 (19) (19) 40% X 40% 40% X 80 X Enacted tax rate Tax payable currently Deferred tax liability Deferred tax asset 16 X 7.6 liability Deferred tax asset $ 16 Ending balances (balances currently needed) Less: Beginning balances Changes needed to achieve desired balances 16 S Required 1 Required 2 > 19 f. At January 1, 2018, Arndt had a deferred tax asset of $7 million and no deferred tax liability. Part 6 of 6 Problem 16-8 Part 6 6. Suppose that during 2019, tax legislation was passed that will lower Arndt's effective tax rate to 30% beginning in 2020. 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 2019. points Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 prepare the necessary journal entry to record income taxes for 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Event General Journal Credit Debit 89 7 Income tax expense Deferred tax asset Deferred tax liability Income tax payable 16 X 80 X