SWFT Comprehensive Volume 2019
42nd Edition
ISBN: 9780357233306
Author: Maloney
Publisher: Cengage
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please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Transcribed Image Text:Arndt, Incorporated reported the following for 2024 and 2025 ($ in millions):
Revenues
Expenses
2024
$ 942
798
Pretax accounting income (income statement)
Taxable income (tax return)
$ 144
2025
$ 1,034
854
$ 180
$ 102
$ 214
Tax rate: 25%
a. Expenses each year include $60 million from a two-year casualty insurance policy purchased in 2024 for $120
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 $61 million and $77 million, respectively. Subscriptions included in 2024 and 2025 financial
reporting revenues were $55 million ($38 million collected in 2023 but not recognized as revenue until 2024)
and $61 million, respectively. Hint. View this as two temporary differences-one reversing in 2024; one
originating in 2024.
d. 2024 expenses included a $44 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 $34 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 $18 million and no deferred tax liability.
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).
Answer is complete but not entirely correct.
Deferred tax amounts (S in millions)
Classification
Amount
Net noncurrent deferred tax asset
$
10.0 x
S
Drov
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