Please answer only Requirement # 2. Thank you very much.

Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 $888 760 $980 800 Revenues Expenses Pretax accounting income (income statement) Taxable income tax return) Tax rate: 25% $ 128 $116 $ 180 $ 200 a. Expenses cach year include $30 million from a two-year casualty insurance policy purchased in 2021 for $60 inillion, The cost is tax deductible in 2021. b. Expenses include $2 million insurance premiums cach year for life insurance on key executives. C. Amdi sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were 533 million and S35 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were 525 million ($10 million collected in 2020 but not recognized as revenue until 2021) and $33 million, respectively. Hint: View this as two temporary differencesone reversing in 2021, one originating in 2021. d. 2021 expenses included a $14 million unrealized loss from reducing investments (classified as trading securi- lies) to fair value. The investments were sold and the loss realized in 2022. e. During 2020, accounting income included an estimated loss of S6 million from having accrued a loss contin- gency. The loss was paid in 2021, at which time it is tax deductible. f. At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability. 1. Which of the five differences described in ilems a-e are temporary and which are permanent Jilterences? Why? 2. Prepare a schedule that (a) reconciles the difference between pretax accounting income and taxable income and (b) determines the amounts necessary to record income taxes for 2021. Prepare the appropriate journal entry. 3. Show how any 2021 deferred lax amounts should be classified and reported on the 2021 balance sheet. 4. Prepare a schedule that (a) reconciles the difference between pretax accounting income and taxable income and (b) determines the amounts necessary to record income taxes for 2022. Prepare the appropriate journal entry. 5. Explain how any 2022 deferred tax amounts should be classified and reported on the 2022 balance sheet. 6. Suppose that during 2022, tax legislation was passed that will lower Arndt's effective tax rale to 15% beginning in 2023. Repeal requirement 4