Required information

[The following information applies to the questions displayed below.] Arndt, Inc., reported the following for 2018 and 2019 ($ in millions):

	2018				2019
Revenues	$	865			$	996
Expenses		762				802
Pretax accounting income (income statement)	$	103			$	194
Taxable income (tax return)	$	100			$	210
Tax rate: 40%

Expenses each year include $20 million from a two-year casualty insurance policy purchased in 2018 for $40 million. The cost is tax deductible in 2018.

Expenses include $1 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 2018 and 2019 were $25 million and $31 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $17 million ($6 million collected in 2017 but not recognized as revenue until 2018) and $25 million, respectively. Hint: View this as two temporary differencesone reversing in 2018; one originating in 2018.

2018 expenses included a $11 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2019.

During 2017, accounting income included an estimated loss of $3 million from having accrued a loss contingency. The loss was paid in 2018 at which time it is tax deductible.

At January 1, 2018, Arndt had a deferred tax asset of $4 million and no deferred tax liability.

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.

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).) Current Year 2018 Future Taxable Amounts [2019] uture Deductible Amounts (S in millions) 019 Pretax accounting income Permanent difference Life insurance pre Temp miums orary differences: Casualty insurance expense Subscriptions-2017 Subscriptions-2018 Unrealized loss Loss contingency Taxable income Enacted tax rate (%) Tax payable currently Deferred tax liability Deferred tax asset Deferred tax liabilit Deferred tax asset