Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-4, 16-6, 16-8]Arndt, Inc., reported the following for 2013 and 2014 ($ in millions): 2013 2014Revenues $888 $983 Expenses 760 800 Pretax accounting income (income statement) $128 $183 Taxable income (tax return) $120 $ 200 Tax rate: 40% a. Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2013 for $60 million. The cost is tax deductible in 2013.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 2013 and 2014 were $33 million and $35 million, respectively. Subscriptions included in 2013 and 2014 financial reporting revenues were $25 million ($10 million collected in 2012 but not earned until 2013) and $33 million, respectively. Hint: View this as two temporary differences�one reversing in 2013; one originating in 2013.d. 2013 expenses included a $17 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2014.e. During 2012, accounting income included an estimated loss of $5 million from having accrued a loss contingency. The loss was paid in 2013 at which time it is tax deductible. f. At January 1, 2013, Arndt had a deferred tax asset of $6 million and no deferred tax liability. Required:1. Which of the five differences described are temporary and which are permanent differences?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 2013. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions (i. e., 10,000,000 should be entered as 10).)3. Compute the deferred tax amounts that should be reported on the 2013 balance sheet. (Enter your answers in millions.)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 2014. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions (i. e., 10,000,000 should be entered as 10).)5. Compute the deferred tax amounts that should be reported on the 2014 balance sheet. (Enter your answers in millions.)6. Suppose that during 2014, tax legislation was passed that will lower Arndt�s effective tax rate to 35% beginning in 2015. 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 2014. (If no entry is required for a particular event, select "No journal entry required" in the first account field. Enter your answers in millions (i. e., 10,000,000 should be entered as 10).)