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gigitorres5803
gigitorres5803
12.03.2021 • 
Business

Ayres Services acquired an asset for $32 million in 2021. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). Ayers deducted 100% of the asset's cost for income tax reporting in 2021. The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022, 2023, and 2024 are as follows: ($ in millions) 2021 2022 2023 2024 Pretax accounting income$390 $410 $425 $460 Depreciation on the income statement 8 8 8 8 Depreciation on the tax return (32) (0) (0) (0) Taxable income$366 $418 $433 $468 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.

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