**Instructions:**Complete this question by entering your answers in the tabs below.**Tabs: Required 1 | Required 2**---**Assignment:**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).)---**Table: Reconciliation Schedule**| ($ in millions) | Current Year 2018 | Future Taxable Amounts [2019] | Future Deductible Amounts [2019] ||------------------------------------|-------------------|-------------------------------|----------------------------------|| Pretax accounting income | | | || Permanent difference: | | | || - Life insurance premiums | | | || Temporary differences: | | | || - Casualty insurance expense | | | || - Subscriptions—2017 | | | || - Subscriptions—2018 | | | || - Unrealized loss | | | || - Loss contingency | | | || Taxable income | | | || Enacted tax rate (%) | | | || Tax payable currently | | | || Deferred tax liability | | | || Deferred tax asset | | | |**Notes:**- Ending balances (balances currently needed)- Less: Beginning balances- Changes needed to achieve desired balances**Table Explanation:**This table is designed to reconcile the pretax accounting income with taxable income by considering both permanent and temporary differences. Permanent differences (like life insurance premiums) are amounts that will never be taxable or deductible. Temporary differences include items such as casualty insurance expense, subscriptions from different years, unrealized losses, and loss contingencies that impact taxable income in different periods.Deferred tax liabilities and assets are calculated based on these adjustments and the enacted tax rate, mapping out the current and future tax implications.**Navigation:**Use the "Required 1 | Required 2" tabs to input respective answers. Required informationProblem 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 | $800 | $840 || Pretax accounting income (income statement) | $195 | $233 || Taxable income (tax return) | $195 | $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 in 2018; one originating in 2018.d. 2018 expenses included a $33 million unrealized loss from reducing investments (classified as trading securities) to fair 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 22. 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.

Solution 2: Tax schedule showing reconciliation between pre tax financial income, taxable income,…

2018 2019 Revenues $ 995 $1,073 800 840 Expenses Pretax accounting income (income statement) Taxable income (tax return) Tax rate: 40% $ 233 $ 245 $ 195 $ 195 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 in 2018; one originating in 2018. d. 2018 expenses included a $33 million unrealized loss from reducing investments (classified as trading securities) to fair 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. blem 16-8 Part 2 epare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, are the necessary journal entry to record income taxes for 2018.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q