Deutsche Autoparts, LLC is a U.S. based manufacturer of after-market automobile components targeting primarily the German automobile market. For Fiscal Year Ending 2014, its first year of operations, Deutsche Autoparts, LLC prepared their audited financial statements in conformance with U.S. GAAP. After-tax Operating Income amounted to $630,000 ($797,468 before-tax) and Shareholders Equity was reported at $3,500,000. The companys tax rate is assumed to be 21%. Deutsche Autoparts uses straight-line depreciation for financial accounting purposes. a. The 12/31/2014 U.S. GAAP balance sheet shows inventory with a balance of $302,500. Records indicate historical cost of $312,000 and replacement cost of $302,500. Through additional analysis you determined that the current estimated selling price is $310,000 with $3,000 cost to sell. The normal profit margin is 15% of selling price. b. The balance sheet shows Property, Plant, & Equipment, all acquired in January 2014, with historical cost of $2,000,000 and accumulated depreciation of $200,000 as of 12/31/2014. Your analysis indicates the fair market value as of December 31 is $2,100,000. d. Deutsche Autoparts is the defendant in a product liability lawsuit. The damages being demanded amount to $150,000. Attorneys believe that it is more likely than not to be settled unfavorably with an estimated range between $100,000 and $150,000. The facts and circumstances of the lawsuit are disclosed in the footnotes of the FYE 2014 financial statements. e. In 2014 Deutsche Autoparts incurred research and development costs totaling $50,000. Deutsche Autoparts is able to clearly distinguish the research phase from the development phase of the project. Research-phase costs amounted to $30,000 and development-phase costs are $20,000. An additional $15,000 of development costs are expected in 2015. The product is expected to be brought to market in 2015 and is expected to be marketable for five years.