Differences between pretax accounting income and taxable income for Ayers Services were as follows during 2022: ($ in millions)Pretax accounting income $450 Permanent difference (39) 411 Temporary difference (31) Taxable income $380 The cumulative temporary difference as of the end of 2022 is $100 million (also the future taxable amount). The enacted tax rate is 25%. What is the deferred tax asset or liability to be reported in the balance sheet?

Deferred tax liability is a balance sheet item that represents the amount of income tax that a…

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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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Differences between pretax accounting income and taxable income for Ayers Services were as follows during 2022:

	($ in millions)
Pretax accounting income		$	450
Permanent difference			(39	)
			411
Temporary difference			(31	)
Taxable income		$	380

The cumulative temporary difference as of the end of 2022 is $100 million (also the future taxable amount). The enacted tax rate is 25%. What is the deferred tax asset or liability to be reported in the balance sheet?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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