Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 888 $ 980 Expenses 760 800 Pretax accounting income (income statement) $ 128 $ 180 Taxable income (tax return) $ 116 $ 200 Tax rate: 25% Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2021 for $60 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 $33 million and $35 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $25 million ($10 million collected in 2020 but not recognized as revenue until 2021) and $33 million, respectively. Hint: View this as two temporary differences—one reversing in 2021; one originating in 2021. 2021 expenses included a $14 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 $6 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. 5. Compute the deferred tax amounts that should be reported on the 2022 balance sheet. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter19: Corporations: Distributions Not In Complete Liquidation

Section: Chapter Questions

Problem 35P

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

	2021		2022
Revenues	$	888		$	980
Expenses		760			800
Pretax accounting income (income statement)	$	128		$	180
Taxable income (tax return)	$	116		$	200
Tax rate: 25%

Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2021 for $60 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 $33 million and $35 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $25 million ($10 million collected in 2020 but not recognized as revenue until 2021) and $33 million, respectively. Hint: View this as two temporary differences—one reversing in 2021; one originating in 2021.
2021 expenses included a $14 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 $6 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.

5. Compute the deferred tax amounts that should be reported on the 2022 balance sheet. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).)

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