The financial statements of Ford Motor Company reveal

the information #4729

The financial statements of Ford Motor Company reveal the information regarding income taxes
shown in Exhibit 2.8.Requireda. Assuming that Ford had no significant permanent differences
between book income and taxable income, did income before taxes for financial reporting
exceed or fall short of taxable income for Year 10? Explain.b. Did net loss before taxes for
financial reporting exceed or fall short of taxable loss for Year 11 ? Explain.c. Will the
adjustment to net income for deferred taxes to compute cash flow from operations in the
statement of cash flows result in an addition or subtraction for Year 10? For Year 11?d. Firms
must recognize expenses related to employee benefit plans as employees provide services but
claim an income tax deduction only when they make cash payments to the benefit plan. Why
are deferred taxes related to employee benefit plans disclosed as a deferred tax asset instead
of a deferred tax liability? Suggest reasons for the direction of the change in amounts for this
deferred tax asset between Year 9 and Year 11.e. Firms must recognize expenses related to
dealer and customer allowances and claims when they recognize sales revenues but claim an
income tax deduction when they make cash payments or provide warranty services. Why are
deferred taxes related to this item disclosed as a deferred tax asset? Suggest reasons for the
direction of the change in amounts for this deferred tax asset between Year 9 and Year 11.f.
Firms must recognize expenses for credit losses as they recognize sales revenues but claim an
income tax deduction when they establish the uncollectibility of a particular customer's account.
Why are deferred taxes related to credit losses disclosed as a deferred tax asset? Suggest
reasons for the direction of the change in amounts for this deferred tax asset between Year 9
and Year 11.g. Ford uses the straight-line depreciation method for financial reporting and
accelerated depreciation methods for income tax purposes. Why are deferred taxes related to
depreciation disclosed as a deferred tax liability? Suggest reasons for the direction of the
change in amounts for this deferred tax liability between Year 9 and Year 11.h. Ford leases
automobiles and trucks to customers under multiyear leases. For financial reporting, Ford treats
these leases as capital, or financing, leases, with income from the manufacturing activity
recognized at the time of delivery of the vehicle to the customer and interest revenue on the
finance receivable recognized over time. For tax reporting, Ford treats these arrangements as
operating leases, with rent revenue recognized over time as customers make periodic lease
payments. Why are deferred taxes related to finance receivables disclosed as a deferred tax
liability? Suggest reasons for the direction of the change in amounts for this deferred tax liability
between Year 9 and Year 11.View Solution:
The financial statements of Ford Motor Company reveal the information

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