Required Information

Problem $16-8($Algo$)$ Multiple differences; taxable income given; two years; change in tax rate; financial

statement effects $[$LO$16-1,16-2,16-3,16-5,16-6,16-8]$

$[$The following information applles to the questions displayed below.$]$

Arndt, Incorporated reported the following for $2024$ and $2025($$ in millions$)$:

Tax rate: $25\%$

a$.$ Expenses each year include $$64$ million from a two$-$year casualty insurance policy purchased in $2024$ for $$128$

million. The cost is tax deductible in $2024.$

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 $2024$ and $2025$

were $$65$ million and $$81$ million, respectively. Subscriptions included in $2024$ and $2025$ financial reporting revenues

were $$59$ million $($ $$42$ million collected in $2023$ but not recognized as revenue until $2024)$ and $$65$ million,

respectively. HInt. View this as two temporary differences$-$one reversing in $2024$; one originating in $2024.$

d$.2024$ expenses included a $$48$ million unrealized loss from reducing investments $($classified as trading securities$)$ to

falr value. The investments were sold and the loss realized in $2025.$

e$.$ During $2023,$ accounting income included an estimated loss of $$38$ million from having accrued a loss contingency.

The loss was paid in $2024,$ at which time it is tax deductible.

f$.$ At January $1,2024,$ Arndt had a deferred tax asset of $$20$ million and no deferred tax liability.

Problem $16-8$ Part $1$

Required:

Which of the five differences described in items a$-$e are temporary and which are permanent differences?