# accounting

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.

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