Ayres Services acquired an asset for $80 million in 2011. The asset is depreciated for financial re 1 answer below »

 
   

Need your ASSIGNMENT done? Use our paper writing service to score better and meet your deadlines.  

Ayres Services acquired an asset for $80 million in 2011. The asset is depreciated for financial reporting purposes over four years on a straight-line basis (no residual value). For tax purposes the asset’s cost is depreciated by MACRS. The enacted tax rate is 40%. Amounts for pretax accounting income, depreciation, and taxable income in 2011, 2012, 2013, and 2014 are as follows: ($in millions) for 2011 pretax accounting income – $330 deprecation on the income statement – 20 depreciation on the tax return – (25) taxable income – $325 for 2012 pretax accounting income – $350 deprecation on the income statement – 20 depreciation on the tax return – (33) taxable income – $337 for 2013 pretax accounting income – $365 deprecation on the income statement – 20 depreciation on the tax return – (15) taxable income – $370 for 2014 pretax accounting income – $400 deprecation on the income statement – 20 depreciation on the tax return – (7) taxable income – $413 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.