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Required $1$

Suppose that during $2025,$ tax legislation was passed that will lower Arndt's effective tax rate to $15\%$ beginning in $2026.$

Prepare a schedule that reconciles the difference between pretax accounting income and taxable income.

Note: Amounts to be deducted should be indicated with a minus sign. Enter your answers in millions $($i$.$e$.,10,000,000$ should be entered as $10).$

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$\backslash$table$[[($ $ in millions$),\backslash$table$[[$Current Year$],[2025]],\backslash$table$[[$Future Taxable$],[$Amounts $[2026]]],\backslash$table$[[$Future Deductible$],[$Amounts $[2026]]]],[$Pretax accounting income$],[$Permanent difference:$],[$Life insurance premiums$],[$Temporary differences:$],[$Casualty insurance $($reversing$)],[$Subscriptions$-2024],[$Subscriptions$-2025],[$Unrealized Inss $($reversing$)],[$Ta O Answer : $($income tax return$)],[$Enacted tax rate $(\%)],[$Tax payable currently$],[$Deferred tax liability$],[$Deferred tax asset,,,$]]$ Prepare the necessary journal entry to record income taxes for $2025.$

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field. Enter your answers in

millions rounded to $1$ decimal place $($i$.$e$.,5,500,000$ should be entered as $5\mathrm{.}5).$

Journal entry worksheet

$1$

Record $2025$ income taxes.

Note: Enter debits before credits.

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

$20242025$

Revenues $ $888$ $ $980$

Expenses $760800$

Pretax accounting income $($income statement$)$ $ $128$ $ $180$

Taxable income $($tax return$)$ $ $116$ $ $200$

Tax rate: $25\%$

Expenses each year include $$30$ million from a two$-$year casualty insurance policy purchased in $2024$ for $$60$ million. The cost is tax deductible in $2024.$

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 $2024$ and $2025$ were $$33$ million and $$35$ million, respectively. Subscriptions included in $2024$ and $2025$ financial reporting revenues were $$25$ million $($$$10$ million collected in $2023$ but not recognized as revenue until $2024)$ and $$33$ million, respectively. $($Hint: View this as two temporary differences$$one reversing in $2024$; one originating in $2024.)$

$2024$ expenses included a $$14$ million unrealized loss from reducing investments $($classified as trading securities$)$ to fair value. The investments were sold and the loss realized in $2025.$

During $2023,$ accounting income included an estimated loss of $$6$ million from having accrued a loss contingency. The loss was paid in $2024,$ at which time it is tax deductible.

At January $1,2024,$ Arndt had a deferred tax asset of $$4$ million and no deferred tax liability.

$6.$ Suppose that during $2025,$ tax legislation was passed that will lower Arndt$$s effective tax rate to $15\%$ beginning in $2026.$ 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 $2025$

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