Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Required information The following information applies to the questions displayed below. Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): 2018 2019
Required information The following information applies to the questions displayed below. Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): 2018 2019 $888 $983 260 800 $128$183 $120 $200 Revenues Expenses Pretax accounting income (income statement) Taxable income (tax return) Tax rate: 40% 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 $33 million and $35 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $25 million ($10 million collected in 2017 but not recognized as revenue until 2018) and $33 million, respectively. Hint: View this as two temporary differences-one reversing in 2018; one originating in 2018. d. 2018 expenses included a $17 million unrealized loss from reducing investments (classified as trading e. During 2017, accounting income included an estimated loss of $5 million from having accrued a loss f. At January 1, 2018, Arndt had a deferred tax asset of $6 million and no deferred tax liability. securities) to fair value. The investments were sold in 2019. contingency. The loss was paid in 2018 at which time it is tax deductible. 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
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started