FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Problem 16-8 Part 4
4. 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 2019.
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 (i.e., 10,000,000 should be entered as 10).)
Current
Year 2019
Future Deductible
Amounts [2020]
Future Taxable
($ in millions)
Amounts [2020]
Pretax accounting income
Permanent difference:
Life insurance premiums
Temporary differences:
Casualty insurance (reversing)
Subscriptions-2018
Subscriptions-2019
Unrealized loss (reversing)
Taxable income (income tax return)
Enacted tax rate (%)
Tax payable currently
Deferred tax liability
Deferred tax asset
Deferred tax liability Deferred tax assets
Ending balances (balances currently needed)
Less: Beginning balances
Changes needed to achieve desired balances
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Transcribed Image Text:Problem 16-8 Part 4 4. 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 2019. 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 (i.e., 10,000,000 should be entered as 10).) Current Year 2019 Future Deductible Amounts [2020] Future Taxable ($ in millions) Amounts [2020] Pretax accounting income Permanent difference: Life insurance premiums Temporary differences: Casualty insurance (reversing) Subscriptions-2018 Subscriptions-2019 Unrealized loss (reversing) Taxable income (income tax return) Enacted tax rate (%) Tax payable currently Deferred tax liability Deferred tax asset Deferred tax liability Deferred tax assets Ending balances (balances currently needed) Less: Beginning balances Changes needed to achieve desired balances
Required information
Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change
in tax rate [LO16-4, 16-6, 16-8]
[The following information applies to the questions displayed below.]
Arndt, Inc., reported the following for 2018 and 2019 ($ in millions):
2018
2019
Revenues
$ 995
$1,073
Expenses
Pretax accounting income (income statement)
Taxable income (tax return)
800
840
$ 195
$ 195
233
$ 245
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
d. 2018 expenses included a $33 million unrealized loss from reducing investments (classified as trading securities) to fair
2018; one originating in 2018.
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 $9 million and no deferred tax liability.
Problem 16-8 Part 2
2. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule,
prepare the necessary journal entry to record income taxes for 2018.
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Transcribed Image Text:Required information Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-4, 16-6, 16-8] [The following information applies to the questions displayed below.] Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): 2018 2019 Revenues $ 995 $1,073 Expenses Pretax accounting income (income statement) Taxable income (tax return) 800 840 $ 195 $ 195 233 $ 245 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 d. 2018 expenses included a $33 million unrealized loss from reducing investments (classified as trading securities) to fair 2018; one originating in 2018. 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. Problem 16-8 Part 2 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 2018.
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