Required information [The following information applies to the questions displayed below.] Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 940 $1,032 Expenses Pretax accounting income (income statement) Taxable income (tax return) 796 852 $ 144 $ 104 180 $4 214 Tax rate: 25% a. Expenses each year include $58 million from a two-year casualty insurance policy purchased in 2021 for $116 million. The cost is tax deductible in 2021. 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 2021 and 2022 were $59 million and $75 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $53 million ($38 million collected in 2020 but not recognized as revenue until 2021) and $59 million, respectively. Hint. View this as two temporary differences-one reversing in 2021; one originating in 2021. d. 2021 expenses included a $42 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold and the loss realized in 2022. e. During 2020, accounting income included an estimated loss of $32 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible. f. At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability. 2. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2021.
Required information [The following information applies to the questions displayed below.] Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 940 $1,032 Expenses Pretax accounting income (income statement) Taxable income (tax return) 796 852 $ 144 $ 104 180 $4 214 Tax rate: 25% a. Expenses each year include $58 million from a two-year casualty insurance policy purchased in 2021 for $116 million. The cost is tax deductible in 2021. 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 2021 and 2022 were $59 million and $75 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $53 million ($38 million collected in 2020 but not recognized as revenue until 2021) and $59 million, respectively. Hint. View this as two temporary differences-one reversing in 2021; one originating in 2021. d. 2021 expenses included a $42 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold and the loss realized in 2022. e. During 2020, accounting income included an estimated loss of $32 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible. f. At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability. 2. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2021.
Chapter17: Corporations: Introduction And Operating Rules
Section: Chapter Questions
Problem 47P
Related questions
Question
![2. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule,
prepare the necessary journal entry to record income taxes for 2021.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. (Amounts to be
deducted should be indicated with a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000
should be entered as 5.5).)
Future
Current
Future Taxable
($ in millions)
Deductible
Year 2021
Amounts [2022]
Amounts [2022]
Pretax accounting income
$
180.0
Permanent difference:
Life insurance premiums
Temporary differences:
Casualty insurance expense
Subscriptions-2020
Subscriptions-2021
Unrealized loss
Loss contingency
Taxable income
$
180.0
$
0.0
Enacted tax rate (%)
Tax payable currently
Deferred tax liability
Deferred tax asset](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa0f76c68-a91d-4bd9-8a61-51848f2d432b%2F44415f34-212f-4143-b862-22dc26c4a766%2Fewru65j_processed.png&w=3840&q=75)
Transcribed Image Text: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 2021.
Complete this question by entering your answers in the tabs below.
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 rounded to 1 decimal place (i.e., 5,500,000
should be entered as 5.5).)
Future
Current
Future Taxable
($ in millions)
Deductible
Year 2021
Amounts [2022]
Amounts [2022]
Pretax accounting income
$
180.0
Permanent difference:
Life insurance premiums
Temporary differences:
Casualty insurance expense
Subscriptions-2020
Subscriptions-2021
Unrealized loss
Loss contingency
Taxable income
$
180.0
$
0.0
Enacted tax rate (%)
Tax payable currently
Deferred tax liability
Deferred tax asset
![Required information
[The following information applies to the questions displayed below.]
Arndt, Inc. reported the following for 2021 and 2022 ($ in millions):
2021
2022
$ 940
$1,032
852
Revenues
Expenses
Pretax accounting income (income statement)
Taxable income (tax return)
796
$ 144
$ 104
180
%24
214
Tax rate: 25%
a. Expenses each year include $58 million from a two-year casualty insurance policy purchased in 2021 for $116 million.
The cost is tax deductible in 2021.
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 2021 and 2022 were
$59 million and $75 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were
$53 million ($38 million collected in 2020 but not recognized as revenue until 2021) and $59 million, respectively. Hint.
View this as two temporary differences-one reversing in 2021; one originating in 2021.
d. 2021 expenses included a $42 million unrealized loss from reducing investments (classified as trading securities) to fair
value. The investments were sold and the loss realized in 2022.
e. During 2020, accounting income included an estimated loss of $32 million from having accrued a loss contingency.
The loss was paid in 2021, at which time it is tax deductible.
f. At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability.
2. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule,
prepare the necessary journal entry to record income taxes for 2021.
Complete this auection hy entering vour answers in the tahs helow](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa0f76c68-a91d-4bd9-8a61-51848f2d432b%2F44415f34-212f-4143-b862-22dc26c4a766%2F6eyegsl_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Arndt, Inc. reported the following for 2021 and 2022 ($ in millions):
2021
2022
$ 940
$1,032
852
Revenues
Expenses
Pretax accounting income (income statement)
Taxable income (tax return)
796
$ 144
$ 104
180
%24
214
Tax rate: 25%
a. Expenses each year include $58 million from a two-year casualty insurance policy purchased in 2021 for $116 million.
The cost is tax deductible in 2021.
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 2021 and 2022 were
$59 million and $75 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were
$53 million ($38 million collected in 2020 but not recognized as revenue until 2021) and $59 million, respectively. Hint.
View this as two temporary differences-one reversing in 2021; one originating in 2021.
d. 2021 expenses included a $42 million unrealized loss from reducing investments (classified as trading securities) to fair
value. The investments were sold and the loss realized in 2022.
e. During 2020, accounting income included an estimated loss of $32 million from having accrued a loss contingency.
The loss was paid in 2021, at which time it is tax deductible.
f. At January 1, 2021, 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 2021.
Complete this auection hy entering vour answers in the tahs helow
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