r 16 Homework Assignmenti Saved Help Check my wor Ayres Serv

r 16 Homework Assignmenti Saved Help Check my wor Ayres Services acquired an asset for $106 million in 2018. The asset is depreciated for financial reporting purposes over four years on a straight-ine 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: (s in millions) 2018 2019 2020 2021 s 395 415 430 465 26.5 26.5 26.5 26.5 Pretax accounting income Depreciation on the income statement Depreciation on the tax return (31.5) (39.5) (21.5) (13.5) Taxable income $ 390 402 435 478 Required: 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 \"O\" wherever applicable. Negative amounts should be indicated by a minus sign. Enter your answers in millions rounded to 1 decimal place (ie, 5,500,000 should be entered as 5.5).) ENG search ip

Solution

2018 2019 2020 2021 Depreciation on the income statement 26.5 26.5 26.5 26.5 Depreciation on the tax return 31.5 39.5 21.5 13.5 Temporary Difference 5 13 -5 -13 Tax liability @ 40% 2 5.2 -2 -5.2 Beginning of 2018 End of 2018 End of 2019 End of 2020 End of 2021 Temporary Difference 0 5 18 13 0 Deferred Tax Liability 0 2 7.2 5.2 0