The following information applies to the questions displayed below.]

Arndt, Inc., reported the following for 2016 and 2017 ($ in millions):

	2016	2017
Revenues	$	995		$	1,055
Expenses		798			838
Pretax accounting income (income statement)	$	197		$	217
Taxable income (tax return)	$	185		$	250
Tax rate: 40%

a.	Expenses each year include $40 million from a two-year casualtyinsurance policypurchased in 2016 for $80 million. The cost is tax deductible in 2016.
b.	Expenses include $3 million insurance premiums each yearfor life insuranceon key executives.
c.	Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2016 and 2017 were $38 million and $62 million, respectively. Subscriptions included in 2016 and 2017 financial reporting revenues were $35 million ($13 million collected in 2015 but not earned until 2016) and $43 million, respectively. Hint: View this as two temporary differencesone reversing in 2016; one originating in 2016.
d.	2016 expenses included a $29 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2017.
e.	During 2015, accounting income included an estimated loss of $7 million from having accrued a loss contingency. The loss was paid in 2016 at which time it is tax deductible.
f.	At January 1, 2016, Arndt had adeferred taxasset of $8 million and no deferred tax liability.

5. value:

1.00 points Required information

Required:

1.	Which of the five differences described are temporary and which are permanent differences?

6. value:

1.00 points Required information

2.

Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to recordincome taxesfor 2016.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.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).)

7. value:

1.00 points Required information

3.	Compute the deferred tax amounts that should be reported on the 2016 balance sheet.(Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

8. value:

1.00 points Required information

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 2017.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.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).)

9. value:

2.00 points Required information

5.	Compute the deferred tax amounts that should be reported on the 2017 balance sheet.(Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

10. value:

2.00 points Required information

6.

Suppose that during 2017, tax legislation was passed that will lower Arndtseffective tax rateto 40% beginning in 2018. 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 2017.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.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).)