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Exercise 16-3 Taxable income given; calculate deferred tax liability [LO16-1] Ayres Services acquired an asset for $108 million in 2018. The asset is depreciated for
Exercise 16-3 Taxable income given; calculate deferred tax liability [LO16-1] Ayres Services acquired an asset for $108 million in 2018. 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 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows in millions 2020 $420 $ 435 2018 2019 2021 470 27.0 Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income 27.0 27.0 27.0 (32.0 _(40.0 _(22.0 (14.0) $ 395 407 440 $ 483 Required Determine (a) the temporary book-tax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "o" wherever applicable. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5.) Beginning of 2018 End of 2018 End of 2019 End of 2020 End of 2021 Temporary Difference Deferred Tax Liability
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