Assuming the tax rate of 28.8% compute the adjustments you would make to the balance sheet and income statement assuming accelerated depreciation is economically correct.

Problem 3 Depreciation The following information was taken from Fords 2012 financial statements. 2012 2011 Net Property (from balance sheet) 24,942 22,371 Depreciation Expense (Automotive and Financial Services) 6,179 5,376 Effective Tax Rate 28.8% Property and equipment are depreciated primarily using the straight-line method over the estimated useful life of the asset. Useful lives range from 3 years to 36 years. The estimated useful lives generally are 14.5 years for machinery and equipment, 3 years for software (8 years for mainframe and client based software), 30 years for land improvements, and 36 years for buildings. Special tools generally are amortized over the expected life of a product program using a straight-line method. If the expected production volumes for major product programs associated with the tools decline significantly, we accelerate the amortization reflecting the rate of decline. 159.6 XaX+ The components of deferred tax assets and liabilities are (Note 24); December 31 2012 December 31, 2011 s 8.079 2417 4973 2.321 1.020 8.189 3.163 4 534 2.297 1,731 594 10 1483 22 285 (1.545 20.740 1 170 Deferred tax assets Employee benefit plans Not operating loss carryforwards Tax credit carryforwards Research expenditures Dealer and customer allowances and aims Other foreign deferred tax assets Allowance for credit losses All other Total gross deferred tax assets Less valuation allowances Total nel deferred tax assets Deferred tax liabilities Leasing transactions Deferred income Depreciation and amortization (excluding leasing transactions) Finance receivables Other foreign deferred tax liabilities All other Total deferred tox liabilities Net deferred tax assets/(labilities) 22.722 20,799 1.145 2,094 1.561 616 379 289 8,034 14 715 5 932 2.095 1.850 561 360 711 6.311 14.429 Assuming the tax rate is 28.8% 35%, Compute the adjustments you would make to the balance sheet and income statement assuming accelerated depreciation is economically Problem 3 Depreciation The following information was taken from Fords 2012 financial statements. 2012 2011 Net Property (from balance sheet) 24,942 22,371 Depreciation Expense (Automotive and Financial Services) 6,179 5,376 Effective Tax Rate 28.8% Property and equipment are depreciated primarily using the straight-line method over the estimated useful life of the asset. Useful lives range from 3 years to 36 years. The estimated useful lives generally are 14.5 years for machinery and equipment, 3 years for software (8 years for mainframe and client based software), 30 years for land improvements, and 36 years for buildings. Special tools generally are amortized over the expected life of a product program using a straight-line method. If the expected production volumes for major product programs associated with the tools decline significantly, we accelerate the amortization reflecting the rate of decline. 159.6 XaX+ The components of deferred tax assets and liabilities are (Note 24); December 31 2012 December 31, 2011 s 8.079 2417 4973 2.321 1.020 8.189 3.163 4 534 2.297 1,731 594 10 1483 22 285 (1.545 20.740 1 170 Deferred tax assets Employee benefit plans Not operating loss carryforwards Tax credit carryforwards Research expenditures Dealer and customer allowances and aims Other foreign deferred tax assets Allowance for credit losses All other Total gross deferred tax assets Less valuation allowances Total nel deferred tax assets Deferred tax liabilities Leasing transactions Deferred income Depreciation and amortization (excluding leasing transactions) Finance receivables Other foreign deferred tax liabilities All other Total deferred tox liabilities Net deferred tax assets/(labilities) 22.722 20,799 1.145 2,094 1.561 616 379 289 8,034 14 715 5 932 2.095 1.850 561 360 711 6.311 14.429 Assuming the tax rate is 28.8% 35%, Compute the adjustments you would make to the balance sheet and income statement assuming accelerated depreciation is economically