Exercise 16-4 (Algo) Taxable Income given; calculate deferred tax liability from book-tax difference; financial statement effects [LO16-2] Ayres Services acquired an asset for $120 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting Income, depreciation, and taxable Income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 2027 Pretax accounting income Depreciation on the income statement $ 355 $375 $390 $ 425 30 30 30 Depreciation on the tax return. (54) Taxable income Required: 30 (34) (20) (12) $ 331 $ 371 $ 400 $ 443 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 (l.e., 5,500,000 should be entered as 5.50). Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027 Cumulative Temporary Difference Deferred Tax Liability
Exercise 16-4 (Algo) Taxable Income given; calculate deferred tax liability from book-tax difference; financial statement effects [LO16-2] Ayres Services acquired an asset for $120 million in 2024. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS. The enacted tax rate is 25%. Amounts for pretax accounting Income, depreciation, and taxable Income in 2024, 2025, 2026, and 2027 are as follows: ($ in millions) 2024 2025 2026 2027 Pretax accounting income Depreciation on the income statement $ 355 $375 $390 $ 425 30 30 30 Depreciation on the tax return. (54) Taxable income Required: 30 (34) (20) (12) $ 331 $ 371 $ 400 $ 443 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 (l.e., 5,500,000 should be entered as 5.50). Beginning of 2024 End of 2024 End of 2025 End of 2026 End of 2027 Cumulative Temporary Difference Deferred Tax Liability
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 1P: Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are...
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