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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 (l.e., 5,500,000 should be entered as 5.50).

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 (l.e., 5,500,000 should be entered as 5.50).

FINANCIAL ACCOUNTING
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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Ayres Services acquired an asset for $168 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: 2824 $385 Cumulative Temporary Difference Deferred Tax Liability 42 (60) $367 ($ in millions) 2025 $ 485 42 (64) $ 383 2026 $ 420 42 (26) $ 436 2827 $ 455 42 (18) $ 479 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 (l.e., 5,500,000 should be entered as 5.50). Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027
Transcribed Image Text:Ayres Services acquired an asset for $168 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: 2824 $385 Cumulative Temporary Difference Deferred Tax Liability 42 (60) $367 ($ in millions) 2025 $ 485 42 (64) $ 383 2026 $ 420 42 (26) $ 436 2827 $ 455 42 (18) $ 479 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 (l.e., 5,500,000 should be entered as 5.50). Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027
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