Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 936 $ 1,028 Expenses 792 848 Pretax accounting income (income statement) $ 144 $ 180 Taxable income (tax return) $ 108 $ 214 Tax rate: 25% Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021. Expenses include $2 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 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $49 million ($34 million collected in 2020 but not recognized as revenue until 2021) and $55 million, respectively. Hint: View this as two temporary differences—one reversing in 2021; one originating in 2021. 2021 expenses included a $38 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold and the loss realized in 2022. During 2020, accounting income included an estimated loss of $28 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible. At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability. Required: 3. Compute the deferred tax amounts that should be reported on the 2021 balance sheet.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 4E: Single Temporary Difference: Multiple Rates At the end of 2019, Fulhage Company reported taxable...

See similar textbooks

Problem 16-8 (Algo) Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-1, 16-2, 16-3, 16-5, 16-6, 16-8]

Skip to question

[The following information applies to the questions displayed below.]

Arndt, Inc. reported the following for 2021 and 2022 ($ in millions):

	2021		2022
Revenues	$	936		$	1,028
Expenses		792			848
Pretax accounting income (income statement)	$	144		$	180
Taxable income (tax return)	$	108		$	214
Tax rate: 25%

Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021.
Expenses include $2 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 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $49 million ($34 million collected in 2020 but not recognized as revenue until 2021) and $55 million, respectively. Hint: View this as two temporary differences—one reversing in 2021; one originating in 2021.
2021 expenses included a $38 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold and the loss realized in 2022.
During 2020, accounting income included an estimated loss of $28 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible.
At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability.

Required:

3. Compute the deferred tax amounts that should be reported on the 2021 balance sheet.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.