For 2012, Acme forecasts the following:

Operating income will grow 5% versus 2011.

Interest expense will be 2.5% of the December 31, 2011 long-term debt balance.

Interest income will be flat from 2011.

Other (expense) income will be flat from 2011.

Suppose that during 2012, Acme comes to believe a valuation allowance is no longer required and that it will eliminate the valuation allowance entirely when it prepares its 2012 financial statements. Acme expects its adjusted effective income tax rate will be unchanged from 2011 to 2012 where the adjusted effective tax rate is the effective tax rate that would arise if there were no change in the valuation allowance during the year. What is Acmes forecasted net income for 2012?

Requirement 3 For 2012, Acme forecasts the following: Operating income will grow 5% versus 2011. Interest expense will be 2.5% of the December 31, 2011 long-term debt balance. Interest income will be flat from 2011. Other (expense) income will be flat from 2011. . Suppose that during 2012, Acme comes to believe a valuation allowance is no longer required and that it will eliminate the valuation allowance entirely when it prepares its 2012 financial statements. Acme expects its adjusted effective income tax rate will be unchanged from 2011 to 2012 where the adjusted effective tax rate is the effective tax rate that would arise if there were no change in the valuation allowance during the year. What is Acme's forecasted net income for 2012? EXHIBIT 5 Tax Rate Schedule If taxable income (line 30, Form 1120) on page 1 is: But not Over- of the amount over- Over- Tax is: $0 $50,000 15% $0 50,000 75,000 S 7,500 + 25% 50,000 75,000 100,000 13,750 + 34% 75,000 100,000 335,000 22,250 + 39% 100,000 335,000 10,000,000 113,900 + 34% 335,000 10,000,000 15,000,000 3,400,000 + 35% 10,000,000 15,000,000 18,333,333 5,150,000 + 38% 15,000,000 18,333,333 35% 0 Source: IRS 2011 Form 1120 Instructions 7. Income Taxes Exhibit 4 The amounts of income tax expense (benefit) reflected in operations follow: 2011 2010 $ Current Federal State Foreign $ 756,126 88,741 532.827 1.377,694 103,040 11,312 594,110 708,462 Deferred Federal Seate Foreign (142.281) (18,802) (1.784) (162.867) 1.214,827 (8,160) (356,950) (5.469) (370,579) 337.883 $ $ The current state tax provision was comprised of taxes on income, the minimum capital tax and other franchise taxes related to the jurisdictions in which the Company's facilities are located. A summary of United States and foreign income before income taxes follows: United States Foreien $ 2011 $ 1,901,905 2,124,115 $ 4,026,020 2010 12,481 2.898,366 2,910,847 $ As discussed in Note 10 below, for segment reporting Direct Import sales are included in the United States segment. However, the revenues are earned by our Asian subsidiary and income taxes are paid in Hong Kong As such, income of the Asian subsidiary is included in the foreign Income before taxes. 32 The following schedule reconciles the amounts of income taxes computed at the United States statutory rates to the actual amounts reported in operations $ 2011 1,368,847 46,160 7.149 Federal income taxes at 34% statutory rate State and local anet, net of federal income tax effect Permanent items Charitable donations Foreign tax rate difference Change in deferred income tax valuation allowance Provision for income taxes 2010 989.688 3,322 24.316 (350,672) (383,179) 54.358 337.833 (306,250) 100,921 1,214,827 $ 5 The following summarizes deferred income tax assets and liabilities: 2011 2010 Deferred income tax liabilities: Plant, property and equipment $ 322.604 383.875 322,604 383,875 Deferred income tax assetst Asset valuations 426,429 372,774 Contribution carryforward 296,802 309,818 Operating loss carryforwards and credits 2.148,208 2.047.287 Pension 467.087 522,903 Foreign tax credit 48.847 Other 418.938 328.718 3.806,311 3.581.500 Net deferred Income tax asset before valuation allowance 3.483.707 3.197.625 Valuation allowance 2.148,208) 2.047.287) Net deferred income taxe 1.335 499 5 1.250.338 In 2011, the Company evaluated its tax positions for years which remain subject to examination by mai tax jurisdictions, in accordance with the requirements of ASC 740 and as a result concluded no adjustment was necessary. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company's evaluation of uncertain tax positions was performed for the tax years ended December 31, 2008 and forward, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2016 In accordance with the Company's accounting policies, any interest and penalties related to uncertain tax positions are recognized as a component of income tax expense. The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently reinvested. Farnings permanently reinvested would become taxable upon the sale or liquidation of a foreign subsidiary or upon the remittance of dividends. During 2011, the Company repatriated $650,000 of foreign earnings from its Canadian subsidiary. U.S. Income taxes on those repatriated earnings have been partially offset by foreign tax credits. The Company plans to continue to repatriate future earnings of its Canadian subsidiary and will provide for US. Income taxes accordingly. Foreign subsidiary earnings of 59.855,051 and $8.616,398 are considered permanently reinvested as of December 31, 2011 and 2010. respectively, and no deferred income taxes have been provided on these foreign earnings Net deed income tax before valuation slowance Valuation Netredince 3401707 (2.18,200) 5 1,33549 100 3.197.625 12.00.20 $ 150,338 In 2011, the Company evaluated les tax positions for years which remain subject to examination by major tax jurisdictions, in accordance with the requirements of ASC 740 and as a result concluded no adjustment was necessary. The Company files income tax returns in the US federal ridiction, and various state and foreign jurisdiction. The Company evaluation of uncertain tax positions was performed for the tax years ended December 11, 2008 and forward, the years which remain subject to examination by major tax jurisdictions as of December 3, 2011 In accordance with the Company's accounting policies, any interest and penalties related to uncertain tax positions are recognised as a component of income tax expense The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently relevante farnings permanently reinvested would become be upon the sale or liquidation of foreign subsidiary or upon the remittance of dividends. During 2011, the Company repatriated 5650,000 of foreign earning from its Canadian subsidiary U.S. Income taxes on these repatriated earnings have been partially offset by foreign tax credits. The Company plans to continue to repatria future carning of its Canadian subsidiary and will provide for US income taxes socordingly Foreign biary earning of $9.855.053 and 58.616.798 recondered permanently reinvested at of December 31, 2011 and 2010 respectively and deferred income tave been provided on the foreign 33 Due to the uncertature of the relation of the Company's deferred income and on performance and any forward expiration date, the Company has recorded a violence for the amount of deferred income tax which wected to be realed. This stonowance subject to periodic review, and the lowance is reduced the benefit will be recorded in operation of the Company tax expense At December 31, 2011, the Company had operating to carry forwarding $6.95249) which were applicable Germany, and can be carried forwardinal F5 F6 F7 FB F9 F10 F11 F12 Requirement 3 For 2012, Acme forecasts the following: Operating income will grow 5% versus 2011. Interest expense will be 2.5% of the December 31, 2011 long-term debt balance. Interest income will be flat from 2011. Other (expense) income will be flat from 2011. . Suppose that during 2012, Acme comes to believe a valuation allowance is no longer required and that it will eliminate the valuation allowance entirely when it prepares its 2012 financial statements. Acme expects its adjusted effective income tax rate will be unchanged from 2011 to 2012 where the adjusted effective tax rate is the effective tax rate that would arise if there were no change in the valuation allowance during the year. What is Acme's forecasted net income for 2012? EXHIBIT 5 Tax Rate Schedule If taxable income (line 30, Form 1120) on page 1 is: But not Over- of the amount over- Over- Tax is: $0 $50,000 15% $0 50,000 75,000 S 7,500 + 25% 50,000 75,000 100,000 13,750 + 34% 75,000 100,000 335,000 22,250 + 39% 100,000 335,000 10,000,000 113,900 + 34% 335,000 10,000,000 15,000,000 3,400,000 + 35% 10,000,000 15,000,000 18,333,333 5,150,000 + 38% 15,000,000 18,333,333 35% 0 Source: IRS 2011 Form 1120 Instructions 7. Income Taxes Exhibit 4 The amounts of income tax expense (benefit) reflected in operations follow: 2011 2010 $ Current Federal State Foreign $ 756,126 88,741 532.827 1.377,694 103,040 11,312 594,110 708,462 Deferred Federal Seate Foreign (142.281) (18,802) (1.784) (162.867) 1.214,827 (8,160) (356,950) (5.469) (370,579) 337.883 $ $ The current state tax provision was comprised of taxes on income, the minimum capital tax and other franchise taxes related to the jurisdictions in which the Company's facilities are located. A summary of United States and foreign income before income taxes follows: United States Foreien $ 2011 $ 1,901,905 2,124,115 $ 4,026,020 2010 12,481 2.898,366 2,910,847 $ As discussed in Note 10 below, for segment reporting Direct Import sales are included in the United States segment. However, the revenues are earned by our Asian subsidiary and income taxes are paid in Hong Kong As such, income of the Asian subsidiary is included in the foreign Income before taxes. 32 The following schedule reconciles the amounts of income taxes computed at the United States statutory rates to the actual amounts reported in operations $ 2011 1,368,847 46,160 7.149 Federal income taxes at 34% statutory rate State and local anet, net of federal income tax effect Permanent items Charitable donations Foreign tax rate difference Change in deferred income tax valuation allowance Provision for income taxes 2010 989.688 3,322 24.316 (350,672) (383,179) 54.358 337.833 (306,250) 100,921 1,214,827 $ 5 The following summarizes deferred income tax assets and liabilities: 2011 2010 Deferred income tax liabilities: Plant, property and equipment $ 322.604 383.875 322,604 383,875 Deferred income tax assetst Asset valuations 426,429 372,774 Contribution carryforward 296,802 309,818 Operating loss carryforwards and credits 2.148,208 2.047.287 Pension 467.087 522,903 Foreign tax credit 48.847 Other 418.938 328.718 3.806,311 3.581.500 Net deferred Income tax asset before valuation allowance 3.483.707 3.197.625 Valuation allowance 2.148,208) 2.047.287) Net deferred income taxe 1.335 499 5 1.250.338 In 2011, the Company evaluated its tax positions for years which remain subject to examination by mai tax jurisdictions, in accordance with the requirements of ASC 740 and as a result concluded no adjustment was necessary. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. The Company's evaluation of uncertain tax positions was performed for the tax years ended December 31, 2008 and forward, the tax years which remain subject to examination by major tax jurisdictions as of December 31, 2016 In accordance with the Company's accounting policies, any interest and penalties related to uncertain tax positions are recognized as a component of income tax expense. The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently reinvested. Farnings permanently reinvested would become taxable upon the sale or liquidation of a foreign subsidiary or upon the remittance of dividends. During 2011, the Company repatriated $650,000 of foreign earnings from its Canadian subsidiary. U.S. Income taxes on those repatriated earnings have been partially offset by foreign tax credits. The Company plans to continue to repatriate future earnings of its Canadian subsidiary and will provide for US. Income taxes accordingly. Foreign subsidiary earnings of 59.855,051 and $8.616,398 are considered permanently reinvested as of December 31, 2011 and 2010. respectively, and no deferred income taxes have been provided on these foreign earnings Net deed income tax before valuation slowance Valuation Netredince 3401707 (2.18,200) 5 1,33549 100 3.197.625 12.00.20 $ 150,338 In 2011, the Company evaluated les tax positions for years which remain subject to examination by major tax jurisdictions, in accordance with the requirements of ASC 740 and as a result concluded no adjustment was necessary. The Company files income tax returns in the US federal ridiction, and various state and foreign jurisdiction. The Company evaluation of uncertain tax positions was performed for the tax years ended December 11, 2008 and forward, the years which remain subject to examination by major tax jurisdictions as of December 3, 2011 In accordance with the Company's accounting policies, any interest and penalties related to uncertain tax positions are recognised as a component of income tax expense The Company provides deferred income taxes on foreign subsidiary earnings, which are not considered permanently relevante farnings permanently reinvested would become be upon the sale or liquidation of foreign subsidiary or upon the remittance of dividends. During 2011, the Company repatriated 5650,000 of foreign earning from its Canadian subsidiary U.S. Income taxes on these repatriated earnings have been partially offset by foreign tax credits. The Company plans to continue to repatria future carning of its Canadian subsidiary and will provide for US income taxes socordingly Foreign biary earning of $9.855.053 and 58.616.798 recondered permanently reinvested at of December 31, 2011 and 2010 respectively and deferred income tave been provided on the foreign 33 Due to the uncertature of the relation of the Company's deferred income and on performance and any forward expiration date, the Company has recorded a violence for the amount of deferred income tax which wected to be realed. This stonowance subject to periodic review, and the lowance is reduced the benefit will be recorded in operation of the Company tax expense At December 31, 2011, the Company had operating to carry forwarding $6.95249) which were applicable Germany, and can be carried forwardinal F5 F6 F7 FB F9 F10 F11 F12