Ayres Services acquired an asset for $152 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) Pretax accounting income 2024 $ 375 2025 $ 395 2026 $ 410 2027 $ 445 Depreciation on the income statement 38 Depreciation on the tax return. (58) $ 355 38 (54) 38 (24) 38 (16) $ 379 $ 424 $ 467 Taxable income 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 (i.e., 5,500,000 should be entered as 5.50). Cumulative Temporary Difference Deferred Tax Liability Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter18: Accounting For Income Taxes
Section: Chapter Questions
Problem 5MC: At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial...
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Ayres Services acquired an asset for $152 million in 2024. The asset is depreciated for financial reporting purposes over four years on
a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%.
Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:
($ in millions)
Pretax accounting income
2024
$ 375
2025
$ 395
2026
$ 410
2027
$ 445
Depreciation on the income statement
38
Depreciation on the tax return.
(58)
$ 355
38
(54)
38
(24)
38
(16)
$ 379
$ 424
$ 467
Taxable income
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 (i.e.,
5,500,000 should be entered as 5.50).
Cumulative Temporary Difference
Deferred Tax Liability
Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027
Transcribed Image Text:Ayres Services acquired an asset for $152 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) Pretax accounting income 2024 $ 375 2025 $ 395 2026 $ 410 2027 $ 445 Depreciation on the income statement 38 Depreciation on the tax return. (58) $ 355 38 (54) 38 (24) 38 (16) $ 379 $ 424 $ 467 Taxable income 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 (i.e., 5,500,000 should be entered as 5.50). Cumulative Temporary Difference Deferred Tax Liability Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027
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