In: Accounting
Arndt, Inc. reported the following for 2021 and 2022 ($ in millions):
2021 | 2022 | ||||||
Revenues | $ | 954 | $ | 1,046 | |||
Expenses | 810 | 866 | |||||
Pretax accounting income (income statement) | $ | 144 | $ | 180 | |||
Taxable income (tax return) | $ | 90 | $ | 214 | |||
Tax rate: 25% | |||||||
4. 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 2022.
Prepare a schedule that reconciles the difference between pretax accounting income and taxable income. (Amounts to be deducted should be indicated with a minus sign. 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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Part 2: Record the Journal Entries for 2022 income taxes.
Solution 4:
Tax schedule showing reconciliation between pre tax financial income, taxable income, deferred tax account (In millions) - Arndt Inc. | |||
Particulars | Current Year - 2022 | Future Taxable Amount | Future Deductible Amount |
FT - DTL | FD - DTA | ||
Pretax accounting income | $180.00 | ||
Permanent Differences: | |||
Life insurance premium | $2.00 | ||
Temporary Differences: | |||
Casualty insurance expense | $72.00 | ||
Subscriptions - 2022 | -$58.00 | ||
Subscriptions - 2023 ($89 - $73 + $58) | $74.00 | $74.00 | |
Unrealized loss | -$56.00 | ||
Taxable Income | $214.00 | ||
$0.00 | $74.00 | ||
Tax rate | 25% | 25% | 25% |
Tax payable currently | $53.50 | ||
Deferred tax liability | $0.00 | ||
Deferred tax assets | $18.50 | ||
Deferred tax liability | Deferred tax Assets | ||
Ending balances (balances currently needed) | $0.00 | $18.50 | |
Less: Beginning balances | $18.00 | $28.50 | |
Changes needed to achieve desired balances | -$18.00 | -$10.00 |
Journal Entries | |||
Date | Particulars | Debit | Credit |
31-Dec-22 | Income tax expense Dr | $45.50 | |
Deferred tax Liability Dr | $18.00 | ||
To Income tax payable | $53.50 | ||
To Deferred tax Assets | $10.00 | ||
(To record income tax expense and deferred taxes) |