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Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-4, 16-6, 16-8]

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[The following information applies to the questions displayed below.] Arndt, Inc., reported the following for 2018 and 2019 ($ in millions):

	2018				2019
Revenues	$	990			$	1,029
Expenses		780				820
Pretax accounting income (income statement)	$	210			$	209
Taxable income (tax return)	$	210			$	230
Tax rate: 40%

1. 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.
2. Expenses include $1 million insurance premiums each year for life insurance on key executives.
3. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2018 and 2019 were $34 million and $48 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $26 million ($8 million collected in 2017 but not recognized as revenue until 2018) and $34 million, respectively. Hint: View this as two temporary differencesone reversing in 2018; one originating in 2018.
4. 2018 expenses included a $24 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2019.
5. During 2017, accounting income included an estimated loss of $3 million from having accrued a loss contingency. The loss was paid in 2018 at which time it is tax deductible.
6. At January 1, 2018, Arndt had a deferred tax asset of $6 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.