Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Transcribed Image Text:Ayres Services acquired an asset for $152 million in 2024. The asset is depreciated for financial reporting purposes over four years on
a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%.
Amounts for pretax accounting income, depreciation, and taxable income in 2024, 2025, 2026, and 2027 are as follows:
($ in millions)
Pretax accounting income
2024
$ 375
2025
$ 395
2026
$ 410
2027
$ 445
Depreciation on the income statement
38
Depreciation on the tax return.
(58)
$ 355
38
(54)
38
(24)
38
(16)
$ 379
$ 424
$ 467
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).
Cumulative Temporary Difference
Deferred Tax Liability
Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027
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