5. Compute the deferred tax amounts that should be reported on the 2025 balance sheet. Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).
5. Compute the deferred tax amounts that should be reported on the 2025 balance sheet. Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
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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%
2024
$ 940
796
$ 144
$ 104
2025
$ 1,032
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.
852
$ 180
$ 214
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 $59 million,
respectively. Hint. View this as two temporary differences-one reversing in 2024; one originating in 2024.
Deferred tax amounts ($ in millions)
Classification
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.
Amount
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 $17 million and no deferred tax liability.
5. Compute the deferred tax amounts that should be reported on the 2025 balance sheet.
Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F55e19062-5547-4604-8621-55e728872c63%2Fe91865b1-cde8-44f4-a079-45c87436e6f6%2Fyaj83o_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Arndt, Incorporated reported the following for 2024 and 2025 ($ in millions):
Revenues
Expenses
Pretax accounting income (income statement)
Taxable income (tax return)
Tax rate: 25%
2024
$ 940
796
$ 144
$ 104
2025
$ 1,032
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.
852
$ 180
$ 214
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 $59 million,
respectively. Hint. View this as two temporary differences-one reversing in 2024; one originating in 2024.
Deferred tax amounts ($ in millions)
Classification
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.
Amount
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.
5. Compute the deferred tax amounts that should be reported on the 2025 balance sheet.
Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).
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