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3. Compute the deferred tax amounts that should be reported on the 2024 balance sheet.

3. Compute the deferred tax amounts that should be reported on the 2024 balance sheet.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Dinesh bhai 

Arndt, Incorporated reported the following for 2024 and 2025 ($ in millions): Revenues Expenses Pretax accounting income (income statement) Taxable income (tax return) Tax rate: 25% a. Expenses each year include $58 million from a two-year casualty insurance policy purchased in 2024 for $116 million. The cost is tax deductible in 2024. 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 2024 and 2025 were $59 million and $75 million, respectively. Subscriptions included in 2024 and 2025 financial reporting revenues were $53 million ($36 million collected in 2023 but not recognized as revenue until 2024) and $59 million, respectively. Hint. View this as two temporary differences-one reversing in 2024; one originating in 2024. d. 2024 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 2025. e. During 2023, accounting income included an estimated loss of $32 million from having accrued a loss contingency. The loss was paid in 2024, at which time it is tax deductible. f. At January 1, 2024, Arndt had a deferred tax asset of $17 million and no deferred tax liability. Answer is complete but not entirely correct. Deferred tax amounts ($ in millions) Classification Net noncurrent deferred tax asset 3. Compute the deferred tax amounts that should be reported on the 2024 balance sheet. Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). $ 2024 $ 940 796 $ 144 $ 104 Amount 2025 $ 1,032 852 $ 180 $ 214 21.0
Transcribed Image Text:Arndt, Incorporated reported the following for 2024 and 2025 ($ in millions): Revenues Expenses Pretax accounting income (income statement) Taxable income (tax return) Tax rate: 25% a. Expenses each year include $58 million from a two-year casualty insurance policy purchased in 2024 for $116 million. The cost is tax deductible in 2024. 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 2024 and 2025 were $59 million and $75 million, respectively. Subscriptions included in 2024 and 2025 financial reporting revenues were $53 million ($36 million collected in 2023 but not recognized as revenue until 2024) and $59 million, respectively. Hint. View this as two temporary differences-one reversing in 2024; one originating in 2024. d. 2024 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 2025. e. During 2023, accounting income included an estimated loss of $32 million from having accrued a loss contingency. The loss was paid in 2024, at which time it is tax deductible. f. At January 1, 2024, Arndt had a deferred tax asset of $17 million and no deferred tax liability. Answer is complete but not entirely correct. Deferred tax amounts ($ in millions) Classification Net noncurrent deferred tax asset 3. Compute the deferred tax amounts that should be reported on the 2024 balance sheet. Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). $ 2024 $ 940 796 $ 144 $ 104 Amount 2025 $ 1,032 852 $ 180 $ 214 21.0
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