Hanshaben Ayres Services acquired an asset for $136 million in 2024. The asset is depreciated for financial reporting purposes over four years ona straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%.Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:2024($in millions)202520262027Pretax accounting income$ 365Depreciation on the income statement34$ 38534$ 40034$ 43534Depreciation on the tax return(56)(44)(22)$ 343$ 375$ 412(14)$ 455Taxable incomeRequired:For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset and (b) thebalance 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 DifferenceDeferred Tax LiabilityBeginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027

Temporary differences arise when there is a difference in the carrying amount of assets and…

Ayres Services acquired an asset for $136 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($ in millions) 2025 2026 Pretax accounting income $ 365 $ 385 Depreciation on the income statement 34 34 $ 400 34 2027 $ 435 34 (56) $ 343 (44) $ 375 $ 412 (22) (14) $ 455 Depreciation on the tax return Taxable income 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).

Ayres Services acquired an asset for $136 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows: 2024 ($ in millions) 2025 2026 Pretax accounting income $ 365 $ 385 Depreciation on the income statement 34 34 $ 400 34 2027 $ 435 34 (56) $ 343 (44) $ 375 $ 412 (22) (14) $ 455 Depreciation on the tax return Taxable income 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).

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 5MC: At the beginning of 2019, Conley Company purchased an asset at a cost of 10,000. For financial...

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