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Ayres Services acquired an asset for $160 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis
Ayres Services acquired an asset for $160 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 2027 Pretax accounting income $ 380 $ 400 Depreciation on the income statement 40 Depreciation on the tax return Taxable income (59) 40 (59) $ 415 40 (25) $ 450 40 (17) $ 361 $ 381 $ 430 $ 473 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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