Question
Ayres Services acquired an asset for $184 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 $184 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the assets cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:
($ in millions)2024202520262027Pretax accounting income$ 395$ 415$ 430$ 465Depreciation on the income statement46464646Depreciation on the tax return(62)(74)(28)(20)Taxable income$ 379$ 387$ 448$ 491Required:
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 "0" wherever applicable. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started