Motorola and Intel are both in the semiconductor industry and compete in many of the same product sectors. But each uses a different depreciation method. Motorola's Year 2 10-K states the following:
Depreciation is recorded principally using the declining-balance method based on the estimated useful lives of the assets (buildings and building equipment, 5-50 years; machinery and equipment, 2-12 years).
So, Motorola is using accelerated depreciation for most of its assets. By contrast, Intel's Year 2 report says:
Depreciation is computed for financial reporting purposes principally by use of the straight-line method over the following estimated useful lives: machinery and equipment, 2 to 4 years; land and buildings, 4 to 45 years.
The following table gives several key financial statement figures for each company from its respective Year 2 10-K and excerpts from its income tax footnote:

Required:
1. Using the information provided and the analytical techniques illustrated in the chapter, determine the tax depreciation for Motorola and Intel for Year 2.
2. Adjust each firm’s pre-tax income to reflect the same depreciation method and useful lives used for tax purposes.
3. Explain why the adjusted numbers provide a better basis for comparing the operating performance of the two companies.

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From the Year 2 10-Ks of Motorola and Intel Selected, Edited Financial Statement Disclosures ($ in millions) Year 2 Year I Book depreciation $2,308 $1,919 Income before income taxes 1,775 3,225 Property, plant and equipment, net of accumulated depreciation (at year-end) 9,768 9,356 December 31 Significant Deferred Tax Assets (Liabilities) Year 2 Year I Inventory reserves $440 $345 Contract accounting methods 231 157 Employee benefits 291 286 Capitalized items 138 89 Tax basis differences on investments (199) (176) Depreciation (213) (197) Deferred taxes on non-U.S. earnings (545) (382) Other deferred income taxes 329 132 Net deferred tax asset $472 $254 (continued)