Arndt, Ic., reported the following for 2018 and 2019 ($ in millions): 2018 2019 $ 995 $1,073 840 $ 233 $ 245 Revenues 800 Expenses Pretax accounting income (income statement) Taxable income (tax return) $ 195 $ 195 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 $9 million and no deferred tax liability. roblem 16-8 Part 2 Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, epare the necessary journal entry to record income taxes for 2018.
Arndt, Ic., reported the following for 2018 and 2019 ($ in millions): 2018 2019 $ 995 $1,073 840 $ 233 $ 245 Revenues 800 Expenses Pretax accounting income (income statement) Taxable income (tax return) $ 195 $ 195 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 $9 million and no deferred tax liability. roblem 16-8 Part 2 Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, epare the necessary journal entry to record income taxes for 2018.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![**Required Information**
**Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-4, 16-6, 16-8]**
*[The following information applies to the questions displayed below.]*
Arndt, Inc., reported the following for 2018 and 2019 ($ 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 $9 million and no deferred tax liability.
---
**Problem 16-8 Part 2**
2. Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. Using the schedule, prepare the necessary journal entry to record income taxes for 2018.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7e4aac61-8b54-44fe-ba9f-2f83a82b72eb%2Fe5164e68-5d7c-4ac1-8159-73241abc822e%2Fl8605vo_processed.png&w=3840&q=75)
Transcribed Image Text:**Required Information**
**Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-4, 16-6, 16-8]**
*[The following information applies to the questions displayed below.]*
Arndt, Inc., reported the following for 2018 and 2019 ($ 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 2**
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 2018.
![# Tax Reconciliation Schedule for 2019
During 2019, tax legislation was passed that will lower Arndt's effective tax rate to 30% beginning in 2020. The following schedule helps reconcile the differences between pre-tax accounting income and taxable income.
## Instructions
Complete the schedule below by entering the necessary values to account for differences. Use this to prepare the necessary journal entries for recording income taxes for 2019. Note: All amounts are in millions and deductions should be indicated with a minus sign.
## Reconciliation Schedule
### Current Year 2019 and Future Amounts for 2020
| **Description** | **Current Year 2019** | **Future Taxable Amounts [2020]** | **Future Deductible Amounts [2020]** |
|-------------------------------------------|-----------------------|-----------------------------------|--------------------------------------|
| **Pretax accounting income** | | | |
| **Permanent difference:** | | | |
| Life insurance premiums | | | |
| **Temporary differences:** | | | |
| Casualty insurance (reversing) | | | |
| Subscriptions—2018 | | | |
| Subscriptions—2019 | | | |
| Unrealized loss (reversing) | | | |
| **Taxable income (income tax return)** | | | |
| **Enacted tax rate** | | | |
| **Tax payable currently** | | | |
| **Deferred tax liability** | | | |
| **Deferred tax asset** | | | |
| | | | |
| **Deferred tax liability** | | | |
| **Deferred tax asset** | | | |
| **Ending balances (balances currently needed)** | | | |
| **Less: Beginning balances** | | | |
| **Changes needed to achieve desired balances** | | | |
Use this structured approach to identify](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7e4aac61-8b54-44fe-ba9f-2f83a82b72eb%2Fe5164e68-5d7c-4ac1-8159-73241abc822e%2Fqpbumls_processed.png&w=3840&q=75)
Transcribed Image Text:# Tax Reconciliation Schedule for 2019
During 2019, tax legislation was passed that will lower Arndt's effective tax rate to 30% beginning in 2020. The following schedule helps reconcile the differences between pre-tax accounting income and taxable income.
## Instructions
Complete the schedule below by entering the necessary values to account for differences. Use this to prepare the necessary journal entries for recording income taxes for 2019. Note: All amounts are in millions and deductions should be indicated with a minus sign.
## Reconciliation Schedule
### Current Year 2019 and Future Amounts for 2020
| **Description** | **Current Year 2019** | **Future Taxable Amounts [2020]** | **Future Deductible Amounts [2020]** |
|-------------------------------------------|-----------------------|-----------------------------------|--------------------------------------|
| **Pretax accounting income** | | | |
| **Permanent difference:** | | | |
| Life insurance premiums | | | |
| **Temporary differences:** | | | |
| Casualty insurance (reversing) | | | |
| Subscriptions—2018 | | | |
| Subscriptions—2019 | | | |
| Unrealized loss (reversing) | | | |
| **Taxable income (income tax return)** | | | |
| **Enacted tax rate** | | | |
| **Tax payable currently** | | | |
| **Deferred tax liability** | | | |
| **Deferred tax asset** | | | |
| | | | |
| **Deferred tax liability** | | | |
| **Deferred tax asset** | | | |
| **Ending balances (balances currently needed)** | | | |
| **Less: Beginning balances** | | | |
| **Changes needed to achieve desired balances** | | | |
Use this structured approach to identify
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education