Required information [The following information applies to the questions displayed below.] 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 $ 913 770 $ 143 $ 135 2019 $ 988 810 $ 178 $ 200 a. 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. b. Expenses include $2 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 $34 million and $31 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $21 million ($10 million collected in 2017 but not recognized as revenue until 2018) and $29 million, respectively. Hint: View this as two temporary differences-one reversing in 2018; one originating in 2018. d. 2018 expenses included a $12 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 $5 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 $5 million and no deferred tax liability. Required: 1. Which of the five differences described are temporary and which are permanent differences? Difference Life insurance premiums Casualty insurance expense Unrealized loss Subscriptions received Loss contingency 2. Prepare a schedule that reconciles the difference between pretax accounting Income and taxable income. Using the schedule, prepare the necessary Journal entry to record Income taxes for 2018. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions i.e., 10,000,000 should be entered as 10).) ($ in millions) Current Year 2018 Future Taxable Amounts [2019] Future Deductible Amounts [2019] Pretax accounting income Permanent difference: Life insurance premiums Temporary differences: Casualty insurance expense Subscriptions2017 Subscriptions2018 Unrealized loss Loss contingency Taxable income Enacted tax rate (%) Tax payable currently Deferred tax liability Deferred tax asset Deferred tax liability Deferred tax asset Ending balances (balances currently needed) Less: Beginning balances Changes needed to achieve desired balances S 0 S 0 (Required 1 Required 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. 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 2018. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet Record 2018 income taxes. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal 3. Compute the deferred tax amounts that should be reported on the 2018 balance sheet. (Enter your answers in millions (I.e., 10,000,000 should be entered as 10).) Deferred tax amounts ($ in millions) Classification Amount 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 2019. Complete this question by entering your answers in the tabs below. Required 1 Required 2 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).) ($ in millions) Current Year 2019 Future Taxable Amounts [2020] Future Deductible Amounts [2020] Pretax accounting income Permanent difference Life insurance premiums Temporary differences: Casualty insurance (reversing) Subscriptions2018 Subscriptions-2019 Unrealized loss (reversing) Taxable income income tax return) Enacted tax rate (%) Tax payable currently Deferred tax liability Deferred tax asset Deferred tax liability Deferred tax assets Ending balances (balances currently needed) Less: Beginning balances Changes needed to achieve desired balances (Required 1 Required 2 > 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 2019. 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.) View transaction list Journal entry worksheet Record 2019 income taxes. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal 5. Compute the deferred tax amounts that should be reported on the 2019 balance sheet. (Enter your answers in millions (.e., 10,000,000 should be entered as 10).) Deferred tax amounts ($ in millions) Classification Amount 6. Suppose that during 2019, tax legislation was passed that will lower Arndt's effective tax rate to 32% 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Suppose that during 2019, tax legislation was passed that will lower Arndt's effective tax rate to 32% 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).) ($ in millions) Current Year 2019 Future Taxable Amounts [2020] Future Deductible Amounts [2020] Pretax accounting income Permanent difference: Life insurance premiums Temporary differences: Casualty insurance (reversing) Subscriptions2018 Subscriptions2019 Unrealized loss (reversing) Taxable income income tax return) Enacted tax rate Tax payable currently Deferred tax liability Deferred tax asset Deferred tax liability Deferred tax asset Ending balances (balances currently needed) Less: Beginning balances Changes needed to achieve desired balances Required 1 Required 2 > 6. Suppose that during 2019, tax legislation was passed that will lower Arndt's effective tax rate to 32% 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. 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.) View transaction list Journal entry worksheet