Question

Arndt, Inc. reported the following for 2021 and 2022 ($ in millions): Revenues Expenses Pretax accounting income (income statement) Taxable income tax return) Tax rate: 25% 2021 $ 950 806 $ 144 $ 94 2022 $1,042 862 $ 180 $ 244 a. Expenses each year include $68 million from a two-year casualty insurance policy purchased in 2021 for $94 million. The cost is tax deductible in 2021. 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 2021 and 2022 were $69 million and $85 million, respectively. Subscriptions included in 2021 and 2022 financial reporting revenues were $63 million ($48 million collected in 2020 but not recognized as revenue until 2021) and $69 million, respectively. Hint View this as two temporary differences-one reversing in 2021, one originating in 2021. d. 2021 expenses included a $52 million unrealized loss from reducing 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 $42 million from having accrued a loss contingency. The loss was paid in 2021, at which time it is tax deductible. f. At January 1, 2021, Arndt had a deferred tax asset of $4 million and no deferred tax liability. 5. Compute the deferred tax amounts that should be reported on the 2022 balance sheet. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10).) Deferred tax amounts ($ in millions) Classification Amount Net noncurrent deferred tax asset Net noncurrent deferred tax liability

Answer 1

Answer Pageinta 0 © Tax scheelwe showsing reconciliation between pre bax financial income , taxable income, deferred tase account (o millions) - Arndt. Inci Particulars fulere taxable Future deducible Current year I amount l amount 2022 F1 - DTLFD - OTA Pre-tar accounting income $ 180 Permanent differences höfe insurance premium Temporary differences Casualting insurance expense $68 Subocoriptions - 2001 (69-63+48) -4 54 Subscriptions 2016 (85-69+54) $70 un realized loss Taxable income $ 214 --$52 254. 25. Tax nate 25% Tax payable currently (2149257) $535 Deferred tax liability Deberied tax assets (40x25 y.)

Deberred tax - liability Ending balances halanes currently needed) $o Begiening balances C$ 14) I changes needed to achieve desired - $17 Page: No Deberred tax assets $14,5 ($26.5) - $9 www.balances The beginning balances are obtained as follows Current years foluere taxable - amount future deductible l amount 2021 $68 Pretax accounting income $144 Permanent differences Life insurance premium "Temporary differences Camusually insurance expense - $68 Subseriptions - 2021 -4 48 Subócriptions - 2022 (69-63+48) $54 unrealized loss $52 loss contingency (reversing) – $42 taxable income. $94 Τα 7 στις 25% Tax payable currently (9420) $23.5 $54 052 $106 $68 25%

Page No ③ Debesured tax liability (68x287) Deberred fast asset5(100x213) 1 $26.5 Deberred tax Deferred tan assets $14 $26.5 Ending balances{ balances Currently needed) Beginning balances changes needed to achieve desired balances -$4 $17 $22.5 . Deberred tax liability = 40 Deferred tax assets = $1715 Ti ket non current deterred tax assets - $14.5 ..The deferred tax amount should be reported on the 2012 balance sheet is classification Amount met poncovient debesued fax asset $ 1815