Question

Ayres Services acquired an asset for $104 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 asset’s 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:

Pretax accounting income Depreciation on the income statement Depreciation on the tax return Taxable income 2021 $345 26 (52) $319 ($ in millions) 2022 2023 $365 $380 26 26 (24) (18) $367 $388 2024 $415 26 (10) $431

Required:
For December 31 of each year, determine (a) the 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).)

Answer 1

Deffered Tas Hability (& Tu millions २०२१ 2021 26 Deprecation en Per Income Portemet 2022 26 2020/2/18 20:58 HH 2021 2022 $ 6.5 Million & o.5 Million $8.8 million Diorconation an les tax Retum 32 24 18 10 Difference -8 Difference betwem Debreciation on lu Income statement and depreciation an Res Tas Rotun is tempratory Difference for Deffered Tax Purpose Total In 2013 (2.0 million Tax (breate Deffed peserse Acents or Brevioch year deffend tox siability Net 550 Million In 2014 ( 4.0 Millons (Reversed leffed fox Liability) Net balance. (6) Il Depreciation an ln Income statemed is lower them Deprecation on Ru Tax Return, it means Prolit as Ru Income statement is higher than pornit on en tax Retun . Hence, it will Goate Deffered top liability Deffered fas Liability $26 X 25% = $6.5 Million Deffned two liability 200 $ 2x25%. = $0.50 Milha of Deffeed fox liability 0202L 2023. Deffered toys Assets & 8X25l. =82 million REDMI NOTE 5 PRO MI DUAL CAMERA Deffered tax Assets $ 16 X 25). $ 4 mil