Attached are the financial statements and selected footnotes from the 2005 annual report of Verizon Communications. Note: In answering the questions only use income before discontinued operations and cumulative effect of accounting change.

1.a.What was Verizon's tax provision for fiscal 2004?

b.What was the amount of income taxes paid by Verizon in fiscal 2004?

2.a.What is the deferred portion of Verizon's tax provision for fiscal 2004?

b.Why is deferred income taxes a positive item in Verizon's consolidated statement of cash flows?

3.A common method of estimating U.S. taxable income from financial statement information is to divide the current portion of federal taxes by the statutory tax rate.

a.Applying this method, what is your estimate of Verizon's U.S. taxable income in fiscal2004?

b.How does your estimate of U.S. taxable income compare to Verizon's domestic (U.S.) pretax financial accounting income reported in the tax footnote? Be specific.

c.Explain in general terms what factor(s) could contribute to the difference between taxable income and financial accounting income noted in your answer to part (b).

4.a.As of December 31, 2004 was Verizon's cumulative depreciation expense recognized in the financial statements higher or lower than the amount deducted for tax purposes? By how much? Hint: The cumulative amounts related to deferred tax assets and liabilities reported in the footnotes are the tax effects of the temporary differences between financial and tax reporting. In order to obtain the actual revenue/expense difference you must divide the footnote amount by the statutory tax rate.

b.Is the difference in depreciation expense for financial reporting and tax purposes calculated in part (a) significant in relation to the carrying value of Verizon's property, plant and equipment at December 31, 2004? Answer this question using a ratio of depreciation to PPE from the chapter on fixed assets in the book.