Problemayres services acquired an asset for 80 million in, Ask an Expert

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Problem:

Ayres Services acquired an asset for $80 million in 2013. 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 2013, 2014, 2015, and 2016 are as follows:

2013 2014 2015 2016
Pretax Accounting income: 330 350 365 400
Depreciation on the income statement 20 20 20 20
Depreciaition on the tax return (25) (33) (15) (7)
Taxable income 325 337 370 413

Required:

Question: 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.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91163568

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