Edited excerpts from Alphabet Inc.'s (parent of Google) 2015 tax note follow: Year Ended December 31, 2013 2014 2015 $5,567 133 (641) (2,482) (433) 644 (49) $2.739 $6,041 132 (164) (2,109) (318) $6,878 (291) (65) (2,624) (407) 0 (188) $3.303 0 57 $3.639 ($ in millions) Expected provision at federal statutory rate (35%) State taxes, net of federal benefit Change in valuation allowance Foreign rate differential Federal research credit Basis difference in investment of Arris Other adjustments Provision for income taxes Current: Federal State Foreign Total Deferred: Federal State Foreign Total Provision for income taxes $2.394 127 711 3,232 $2.716 157 774 3,647 $3,235 (397) 723 3,561 (421) 0 (72) (493) $ 2,739 29 6 (43) (198) (43) (17) (258) $3,303 (8) $3.639 (continued) As of December 31. 2014 2015 Deferred tax assets: Stock-based compensation expense State taxes Investment loss Legal settlement accruals Accrued employee benefits Accruals and reserves not currently deductible Net operating losses Tax credits Basis difference in investment of Arris Prepaid cost sharing Other Total deferred tax assets Valuation allowance Total deferred tax assets net of valuation allowance Deferred tax liabilities: Depreciation and amortization Identified intangibles Mark-to-market investments Renewable energy investments Foreign earnings Other Total deferred tax liabilities Net deferred tax liabilities $ 376 133 133 175 671 175 207 262 1,347 0 243 3.722 (1.659) 2,063 $ 534 119 144 101 832 245 230 503 1.357 3,468 337 7.870 (1.732) 6.138 (852) (965) (273) (430) 0 (125) (2.645) $ (582) (1.126) (787) (93) (529) (3.468) (73) (6.076) 62 Source: Alphabet, Inc. 2015 Form 10-K. Required: 1. Prepare the book journal entry for income tax expense for 2015 (combine U.S., foreign, and state income taxes). Clearly indicate both the account title and whether the account is being debited or credited. 2. Using information given in the tax rate reconciliation, estimate Alphabet's pre-tax book income for 2015. 3. What was Alphabet's 2015 effective tax rate? 4. Using information found in the tax note, determine whether depreciation and amortization expense was higher for book or tax purposes in 2015 and by how much. 5. Based on information in the tax note, are the tax rates in foreign countries in which Alphabet operates greater than or less than the U.S. tax rate? 6. Explain why federal research credits appear in the tax rate reconciliation