accounting

posted by .

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.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. accounting

    Sherrod, Inc., reported pretax accounting income of $89 million for 2006. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in …
  2. college finance

    37. Morage Corp. is replacing an entire baking line that was purchased for $420,000 and currently has a book value of $60,000. The new, more efficient line, will cost $940,000 installed and can be depreciated as a 7-year MACRS asset. …
  3. Math

    An asset is purchased for $50,000. It has an estimated useful life of eight years and salvage value of $6,000.if the asset is depreciated using the double-declining balance method,what are the depreciation expense and book value at …
  4. Finance

    Summer Tyme, Inc., is considering a new 4-year expansion project that requires an initial fixed asset investment of $1.782 million. The fixed asset will be depreciated straight-line to zero over its 4-year tax life, after which time …
  5. accounting

    Calculate the rate of depreciation for the asset with the help of given data.?
  6. Economics

    Moore Company is considering an expansion project. It would require the acquisition of an asset that would be depreciated straight line to zero over the 4 years of the project. It expects to be able to sell the asset for $50,000 at …
  7. intermediate 111

    Wilson Corporation began operations in January 2008, and purchased a machine for $20,000. Wilson uses straight-line depreciation over a four-year period for financial reporting purposes. For tax purposes, the deduction is 50% of cost …
  8. Accounting

    Identify each statement as true or false. If false, indicate how to correct the statement. 1. Depreciation is a process of asset valuation, not cost allocation. 2. Depreciation provides for the proper matching of expenses with revenues. …
  9. Managerial Accounting

    Kim Johnson purchased an asset for $80,000. Annual operating cash inflows are expected to be $30,000 each year for four years. At the end of the life of the asset, Kim will not be able to sell the asset because it will have no salvage …
  10. accounting

    Tyler Constructions constructed a new campus block to house Business School. The building cost a tool of $180,000,000 to construct and was completed 30 March 2011, with an expected useful life of 60 years and residual value of $10,000,000. …

More Similar Questions