Arndt, Inc. reported the following for 2021 and 2022 ($ in millions):20212022Revenues$ 888$ 980ExpensesPretax accounting income (income statement)Taxable income (tax return)760800$ 128$ 116$ 180$ 200Tax rate: 25%a. Expenses each year include $30 million from a two-year casualtyinsurance policy purchased in 2021 for $60 million. The cost is taxdeductible in 2021.b. Expenses include $2 million insurance premiums each year for lifeinsurance on key executives.c. Arndt sells one-year subscriptions to a weekly journal. Subscriptionsales collected and taxable in 2021 and 2022 were $33 million and$35 million, respectively. Subscriptions included in 2021 and 2022financial reporting revenues were $25 million ($10 million collectedin 2020 but not recognized as revenue until 2021) and $33 million,respectively. Hint View this as two temporary differences-onereversing in 2021; one originating in 2021.d. 2021 expenses included a $14 million unrealized loss fromreducing investments (classified as trading securities) to fair value.The investments were sold and the loss realized in 2022.e. During 2020, accounting income included an estimated loss of $6million from having accrued a loss contingency. The loss was paidin 2021, at which time it is tax deductible.f. At January 1, 2021, Arndt had a deferred tax asset of $4 million andno deferred tax liability.4. Prepare a schedule that reconciles the difference between pretax accountingincome and taxable income. Using the schedule, prepare the necessary journal entryto record income taxes for 2022.Complete this question by entering your answers in the tabs below.Required 1Required 2

Taxable income refers to the sum value of money gained by an entity on which the authorized…

Answered: accounting income (income sta eincome…

accounting income (income sta eincome (tax return) : 25% s each year include $30 million fro e policy purchased in 2021 for $60 e in 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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