Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 Pretax accounting income $ 330 2025 $ 350 2026 2027 $ 365 Depreciation on the income statement 20 20 20 $ 400 20 Depreciation on the tax return Taxable income (25) (33) (15) (7) $ 325 $ 337 $ 370 $ 413 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

Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 Pretax accounting income $ 330 2025 $ 350 2026 2027 $ 365 Depreciation on the income statement 20 20 20 $ 400 20 Depreciation on the tax return Taxable income (25) (33) (15) (7) $ 325 $ 337 $ 370 $ 413 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

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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