Auburn Rentals acquired an asset for $160 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis with no residual value. For tax purposes, the asset is depreciated using an accelerated method. The enacted tax rate is 30%.Annual amounts for pretax accounting income, depreciation, and taxable income are as follows:| | 2021 | 2022 | 2023 ||--------------------|------|------|------|| Pretax accounting income | $500 | $550 | $600 || Depreciation on the income statement | 40 | 40 | 40 || Depreciation on the tax return | (50) | (66) | (30) || Taxable income | 450 | 484 | 570 |- 2024: - Pretax accounting income: $650 - Depreciation on the income statement: 40 - Depreciation on the tax return: (14) - Taxable income: 636On December 31, 2023, what amount of deferred tax liability would Auburn report?**Multiple Choice:**- \$3.2 million- \$10.0 million- \$26.0 million- \$7.8 million

Deferred tax liability is the amount of tax due and not yet paid to the federal tax authorities.

Auburn Rentals acquired an asset for $160 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis with no residual value. For tax purposes the asset is depreciated using an accelerated method. The enacted tax rate is 30%.

Auburn Rentals acquired an asset for $160 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis with no residual value. For tax purposes the asset is depreciated using an accelerated method. The enacted tax rate is 30%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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