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Ayres Services acquired an asset for $136 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($ in millions) 2025 2026 Pretax accounting income $ 365 $ 385 Depreciation on the income statement 34 34 $ 400 34 2027 $ 435 34 (56) $ 343 (44) $ 375 $ 412 (22) (14) $ 455 Depreciation on the tax return Taxable income Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).

Ayres Services acquired an asset for $136 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($ in millions) 2025 2026 Pretax accounting income $ 365 $ 385 Depreciation on the income statement 34 34 $ 400 34 2027 $ 435 34 (56) $ 343 (44) $ 375 $ 412 (22) (14) $ 455 Depreciation on the tax return Taxable income Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Ayres Services acquired an asset for $136 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($in millions) 2025 2026 2027 Pretax accounting income $ 365 Depreciation on the income statement 34 $ 385 34 $ 400 34 $ 435 34 Depreciation on the tax return (56) (44) (22) $ 343 $ 375 $ 412 (14) $ 455 Taxable income Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Cumulative Temporary Difference Deferred Tax Liability Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027
Transcribed Image Text:Ayres Services acquired an asset for $136 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($in millions) 2025 2026 2027 Pretax accounting income $ 365 Depreciation on the income statement 34 $ 385 34 $ 400 34 $ 435 34 Depreciation on the tax return (56) (44) (22) $ 343 $ 375 $ 412 (14) $ 455 Taxable income Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). Cumulative Temporary Difference Deferred Tax Liability Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027
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