Exercise 16-5 (Algo) Taxable income given; calculate deferred tax liability from book-tax difference;100% depreciation in the year of purchase; financial statement effects [LO16-2]Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years ona straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rateis 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:2024($ in millions)202520262027Pretax accounting income$ 370$ 390Depreciation on the income statement2020$ 40520Depreciation on the tax return(80)(0)(0)$ 44020(8)$ 310$ 410$ 425$ 460Taxable incomeRequired:For December 31 of each year, determine (a) the cumulative temporary book-tex difference for the depreciable asset and (b) thebalance to be reported in the deferred tax liability account.Note: Leave no cell blank, enter "O" wherever applicable. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).Cumulative Temporary DifferenceDeferred Tax LiabilityBeginning of 2024 End of 2024End of 2025End of 2026End of 2027

Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate: is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 Pretax accounting income $ 370 $ 390 $ 405 2027 $ 440 Depreciation on the income statement Depreciation on the tax return 20 20 20 20 (80) (e) (e) (@)

Ayres Services acquired an asset for $80 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2024. The enacted tax rate: is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 Pretax accounting income $ 370 $ 390 $ 405 2027 $ 440 Depreciation on the income statement Depreciation on the tax return 20 20 20 20 (80) (e) (e) (@)

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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