Ayres Services acquired an asset for $144 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset/s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: _ ($ in millions) ____________ 2021 2022 2023 2024 Pretax accounting income $370 $390 $405 $440 Depreciation on the income statement 36 36 36 36 Depreciation on the tax return (57) (49) (23) (15) Taxable income $349 $377 $418 $461 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. (Leave no cell balance, enter “0” wherever applicable. Enter your answers in millions rounded to 2 decimal place (I,e., 5,500,000 should be entered as 5.50). Beginning of 2021 End of 2021 End of 2022 End of 2023 End of 2024 Cumulative Temporary Difference ___________ __________ __________ _________ ___________ Deferred Tax Liability _____________ __________ __________ _________ ____________
Ayres Services acquired an asset for $144 million in 2021. The asset is
_ ($ in millions) ____________
2021 2022 2023 2024
Pretax accounting income $370 $390 $405 $440
Depreciation on the income statement 36 36 36 36
Depreciation on the tax return (57) (49) (23) (15)
Taxable income $349 $377 $418 $461
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
Beginning of 2021 End of 2021 End of 2022 End of 2023 End of 2024
Cumulative Temporary Difference ___________ __________ __________ _________ ___________
Deferred Tax Liability _____________ __________ __________ _________ ____________
The temporary difference is the difference between the carrying value of the liability or assets in the tax base and the statement of financial position. The temporary difference results in either deferred tax assets or liability.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 4 images