Exercise 16-4 (Algo) Taxable income given; calculate deferred tax liability from book-tax difference [LO16-2]

Ayres Services acquired an asset for $152 million in 2021. 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 2021, 2022, 2023, and 2024 are as follows:

	($ in millions)
	2021				2022				2023				2024
Pretax accounting income	$	375			$	395			$	410			$	445
Depreciation on the income statement		38				38				38				38
Depreciation on the tax return		(58	)			(54	)			(24	)			(16	)
Taxable income	$	355			$	379			$	424			$	467

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. (Leave no cell blank, enter "0" wherever applicable. Enter your answers in millions rounded to 2 decimal place (i.e., 5,500,000 should be entered as 5.50).) Note: Temporary differences should be computed as depreciation expense on the income statement minus depreciation expense on the tax return (e.g., if depreciation expense is higher on the income statement than on the tax return, the difference will be positive; if depreciation expense is lower on the income statement than on the tax return, the difference will be negative.)

	End of 2021	End of 2022	End of 2023	End of 2024
Cumulative Temporary Difference
Deferred Tax Liability