Determine the temporary book-tax difference

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Question - Ayres Services acquired an asset for $112 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:

 

($ in millions)

 

2021

2022

2023

2024

Pretax accounting income

$350

$370

$385

$420

 

Depreciation on the income statement

28

28

28

28

Depreciation on the tax return

(53)

(29)

(19)

(11)

Taxable income

$325

$369

$394

$437

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.

Reference no: EM132483138

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