[The following information applies to the questions displayed below.] Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): 2021 2022 Revenues $ 936 $ 1,028 Expenses 792 848 Pretax accounting income (income statement) $ 144 $ 180 Taxable income (tax return) $ 108 $ 214 Tax rate: 25% Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021. Expenses include $2 million insurance premiums each year for life insurance on key executives. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $49 million ($34 million collected in 2020 but not recognized as revenue until 2021) and $55 million, respectively. Hint: View this as two temporary differences—one reversing in 2021; one originating in 2021. 2021 expenses included a $38 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold and the loss realized in 2022. During 2020, accounting income included an estimated loss of $28 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible. At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability. 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 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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I need help with required 2 please.

Problem 16-8 (Algo) Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-1, 16-2, 16-3, 16-5, 16-6, 16-8]

[The following information applies to the questions displayed below.]

Arndt, Inc. reported the following for 2021 and 2022 ($ in millions):

	2021		2022
Revenues	$	936		$	1,028
Expenses		792			848
Pretax accounting income (income statement)	$	144		$	180
Taxable income (tax return)	$	108		$	214
Tax rate: 25%

Expenses each year include $54 million from a two-year casualty insurance policy purchased in 2021 for $108 million. The cost is tax deductible in 2021.
Expenses include $2 million insurance premiums each year for life insurance on key executives.
Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2021 and 2022 were $55 million and $71 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $49 million ($34 million collected in 2020 but not recognized as revenue until 2021) and $55 million, respectively. Hint: View this as two temporary differences—one reversing in 2021; one originating in 2021.
2021 expenses included a $38 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold and the loss realized in 2022.
During 2020, accounting income included an estimated loss of $28 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible.
At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability.

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 2021.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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