E 16-5 Taxable income given; calculate deferred tax liability from book-tax difference; 100% depreciation in the year of purchase; financial statement effects LO16-2 [This exercise is a variation of E 16-4, modified to have the asset fully depreciated in the year of purchase.] 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 2027 Pretax accounting income $330 $350 $365 $400 Depreciation on the income statement 20 20 20 20 Depreciation on the tax return (80) (0) (0) (0) Taxable income $270 $370 $385 $420 Required: For December 31 of each year, determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account.
E 16-5 Taxable income given; calculate deferred tax liability from book-tax difference; 100% depreciation in the year of purchase; financial statement effects LO16-2 [This exercise is a variation of E 16-4, modified to have the asset fully depreciated in the year of purchase.] 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 2027 Pretax accounting income $330 $350 $365 $400 Depreciation on the income statement 20 20 20 20 Depreciation on the tax return (80) (0) (0) (0) Taxable income $270 $370 $385 $420 Required: For December 31 of each year, determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
None
![E 16-5 Taxable income given; calculate deferred tax liability from book-tax difference; 100% depreciation
in the year of purchase; financial statement effects LO16-2
[This exercise is a variation of E 16-4, modified to have the asset fully depreciated in the year of purchase.] 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
2027
Pretax accounting income
$330
$350
$365
$400
Depreciation on the income statement
20
20
20
20
Depreciation on the tax return
(80)
(0)
(0)
(0)
Taxable income
$270
$370
$385
$420
Required:
For December 31 of each year, determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to
be reported in the deferred tax liability account.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdcfb0428-8e62-41c8-9d2b-3e4003f8af75%2F70b1dfc6-a055-4b70-abe7-89153f4b72ab%2Fsbx8oph_processed.png&w=3840&q=75)
Transcribed Image Text:E 16-5 Taxable income given; calculate deferred tax liability from book-tax difference; 100% depreciation
in the year of purchase; financial statement effects LO16-2
[This exercise is a variation of E 16-4, modified to have the asset fully depreciated in the year of purchase.] 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
2027
Pretax accounting income
$330
$350
$365
$400
Depreciation on the income statement
20
20
20
20
Depreciation on the tax return
(80)
(0)
(0)
(0)
Taxable income
$270
$370
$385
$420
Required:
For December 31 of each year, determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to
be reported in the deferred tax liability account.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education