Arndt, Ic., reported the following for 2018 and 2019 ($ in millions): 2018 2019 $ 995 $1,073 840 $ 233 $ 245 Revenues 800 Expenses Pretax accounting income (income statement) Taxable income (tax return) $ 195 $ 195 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 $39 million and $57 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $36 million ($14 million collected in 2017 but not recognized as revenue until 2018) and $44 million, respectively. Hint: View this as two temporary differences-one reversing in 2018; one originating in 2018. d. 2018 expenses included a $33 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 $8 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 $9 million and no deferred tax liability. roblem 16-8 Part 2 Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, epare the necessary journal entry to record income taxes for 2018.
Arndt, Ic., reported the following for 2018 and 2019 ($ in millions): 2018 2019 $ 995 $1,073 840 $ 233 $ 245 Revenues 800 Expenses Pretax accounting income (income statement) Taxable income (tax return) $ 195 $ 195 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 $39 million and $57 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $36 million ($14 million collected in 2017 but not recognized as revenue until 2018) and $44 million, respectively. Hint: View this as two temporary differences-one reversing in 2018; one originating in 2018. d. 2018 expenses included a $33 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 $8 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 $9 million and no deferred tax liability. roblem 16-8 Part 2 Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, epare the necessary journal entry to record income taxes for 2018.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.6AP
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