Exercise 16-3 Taxable income given; calculate deferred tax liability [LO16-1]

Ayres Services acquired an asset for $92 million in 2016. 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 2016, 2017, 2018, and 2019 are as follows:

	($ in millions)
	2016			2017			2018			2019
Pretax accounting income	$	360		$	380		$	395		$	430
Depreciation on the income statement		23.0			23.0			23.0			23.0
Depreciation on the tax return		(28.0	)		(36.0	)		(18.0	)		(10.0	)
Taxable income	$	355		$	367		$	400		$	443

Required:

Determine (a) the temporary booktax difference for the depreciable asset and (b) the balance to be reported in the deferred tax liability account. (Negative amounts should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

	Beginning of 2016	End of 2016	End of 2017	End of 2018	End of 2019
Temporary Difference
Deferred Tax Liability