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 2024.
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 2024.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Don't give answer in image
![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 $17 million and no deferred tax liability.
2. Prepare a schedule that reconciles the difference between pretax accounting Income and taxable income. Using the schedule.
Orepare the necessary Journal entry to record Income taxes for 2024.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
($ in millions)
Required 1 Required 2
Prepare a schedule that reconciles the difference between pretax accounting income and taxable income.
Note: 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).
Pretax accounting income
Permanent difference:
Life insurance premiums
Temporary differences:
Casualty insurance expense
Subscriptions-2023
Subscriptions-2024
Unrealized loss
Loss contingency
Taxable income
Enacted tax rate (%)
Tax payable currently
Deferred tax liability
Deferred tax asset
Current
Year
2024
S 144.0
2824
$ 940
796
$ 144
$ 184
2.00
(58.0) ✔
(38.0) X
44.0
42.0
(32.0)
S 104.0
25.0% Ⓒ
28.0✔
2025
$ 1,032
852
$ 180
$ 214
S
< Required 1
Future Taxable
Amounts [2025]
58.0
58.0
S
Future
Deductible
Amounts
[2025]
44.0 X
42.0 X
86.0
14.0%
Required 2 >
21.0
(6.5) X](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffdf9f861-42cd-41b9-8fb4-6cbe2071da59%2F138b1780-f57c-4f97-87c6-ab71dfa9c984%2Frle77h_processed.png&w=3840&q=75)
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 $17 million and no deferred tax liability.
2. Prepare a schedule that reconciles the difference between pretax accounting Income and taxable income. Using the schedule.
Orepare the necessary Journal entry to record Income taxes for 2024.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
($ in millions)
Required 1 Required 2
Prepare a schedule that reconciles the difference between pretax accounting income and taxable income.
Note: 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).
Pretax accounting income
Permanent difference:
Life insurance premiums
Temporary differences:
Casualty insurance expense
Subscriptions-2023
Subscriptions-2024
Unrealized loss
Loss contingency
Taxable income
Enacted tax rate (%)
Tax payable currently
Deferred tax liability
Deferred tax asset
Current
Year
2024
S 144.0
2824
$ 940
796
$ 144
$ 184
2.00
(58.0) ✔
(38.0) X
44.0
42.0
(32.0)
S 104.0
25.0% Ⓒ
28.0✔
2025
$ 1,032
852
$ 180
$ 214
S
< Required 1
Future Taxable
Amounts [2025]
58.0
58.0
S
Future
Deductible
Amounts
[2025]
44.0 X
42.0 X
86.0
14.0%
Required 2 >
21.0
(6.5) X
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