Ayres Services acquired an asset for $168 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows:     ($ in millions)     2021   2022   2023   2024   Pretax accounting income $ 385     $ 405     $ 420     $ 455     Depreciation on the income statement   42       42       42       42     Depreciation on the tax return   (60 )     (64 )     (26 )     (18 )   Taxable income $ 367     $ 383     $ 436     $ 479       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.  Beginning of 2021  End of 2021   End of 2022   End of 2023  End of 2024 Cumulative Temporary Difference      Deferred Tax Liability

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Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.