Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years ona straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%.Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:Pretax accounting incomeDepreciation on the income statementDepreciation on the tax returnTaxable incomeRequired:2024$ 33020(25)$325Cumulative Temporary DifferenceDeferred Tax Liability($ in millions)2025$35020(33)$3372026$36520(15)$370 $413Beginning of 20242027$ 400For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) thebalance to be reported in the deferred tax liability account.Note: Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e.,5,500,000 should be entered as 5.50).20(7)End of 2024End of 2025End of 2026End of 2027

Deferred tax liability is created when a tax obligation is accumulated in one financial year but…

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: Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income Required: 2024 $ 330 Cumulative Temporary Difference Deferred Tax Liability 20 (25) $325 ($ in millions) 2025 $ 350 20 (33) $ 337 $ 370 2026 $365 20 (15) 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 "0" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). 2027 $ 400 20 (7) $413 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: Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income Required: 2024 $ 330 Cumulative Temporary Difference Deferred Tax Liability 20 (25) $325 ($ in millions) 2025 $ 350 20 (33) $ 337 $ 370 2026 $365 20 (15) 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 "0" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50). 2027 $ 400 20 (7) $413 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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