Ayres Services acquired an asset for $48 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: Pretax accounting income 2024 $ 500 ($ in millions) 2025 2026 $ 520 Depreciation on the income statement 12 12 $ 535 12 2027 $ 570 12 Depreciation on the tax return Taxable income (48) $ 464 (0) $ 532 (0) $ 547 (0) $ 582 Required: For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) the nd in the deferred tax liability so

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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.