Reference no: EM132488974

Point 1: Ayres Services acquired an asset for $104 million in 2018. 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 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2018, 2019, 2020, and 2021 are as follows:

($ in millions)                                           2018                2019                   2020                  2021

Pretax accounting income                  $390               $410               $425                  $460

Depreciation on the income statement  26.0                 26.0              26.0                     26.0

Depreciation on the tax return           (31.0)               (39.0)              (21.0)                (13.0)

Taxable income                               $385                    $397              $430                  $473

Required:

Question 1: 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. Show all amounts as positive amounts. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)