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Exhibits 1.19-1.21 of Integrative Case 1.1 (Chapter 1) present the financial statements for Walmart for 2012-2015. In addition, the website for this text contains Walmart's December 31, 2015, Form 10-K. Use this information, especially Note 9, "Taxes," to answer the following questions: REQUIRED a. Assuming that Walmart had no significant permanent differences between book income and taxable income, did income before taxes for financial reporting exceed or fall short of taxable income for the year ending January 31, 2016 (hereafter, fiscal 2015)? Explain. b. Assuming all current taxes are paid in cash, will the adjustment to net income for deferred taxes to compute cash flow from operations in the statement of cash flows result in an addition or subtraction for fiscal 2015? c. Walmart reports deferred revenue for sales of gift certificates and for Sam's Club membership fees. These amounts are taxed when collected, but not recognized in financial reporting income until tendered at a store. Why does the tax effect of deferred revenue appear as a deferred tax asset? d. Walmart recognizes a valuation allowance on its deferred tax assets to reflect net operating losses of consolidated foreign subsidiaries. The valuation allowance decreased over the last year. What effect does this have on net income in the most recent year (fiscal 2015)? e. Walmart uses the straight-line depreciation method for financial reporting and accelerated depreciation for income tax reporting. Like most firms, the largest deferred tax liability is for property, plant, and equipment (depreciation). Explain how depreciation leads to a deferred tax liability. Suggest possible reasons why the amount of the deferred tax liability related to depreciation decreased over the last year. Assets: Cash and cash equivalents Accounts and notes receivable - net Inventories Prepaid expenses and other current assets Current assets of discontinued segments Current Assets Property, plant, and equipment -at cost Accumulated depreciation Goodwill Other assets Total Assets Liabilities and Equities: 2014 2015 2016 Accounts payable Current accrued expenses Notes payable and short-term debt Current maturities of long-term debt Income taxes payable Current liabilities of discontinued operations Current Liabilities Long-term debt obligations Deferred tax liabilities-noncurrent Redeemable noncontrolling interest Total Liabilities Common stock + Additional paid-in capital Retained earnings Accum. other comprehensive income (loss) Total Common Shareholders' Equity \begin{tabular}{rrrr} $7,281 & $,135 & $8,705 \\ 6,677 & 6,778 & 5,624 \\ 44,858 & 45,141 & 44,469 \\ 1,909 & 2,224 & 1,441 \\ 460 & & 60,239 \\ \hline$61,185 & $63,278 & $88,054 \\ 178,678 & 182,634 & (71,538) \\ (60,771) & (65,979) & 16,695 \\ 19,510 & 18,102 & 6,131 \\ \hline 6,149 & 5,455 & $199,581 \\ \hline$204,751 & $203,490 & $ \\ \hline \end{tabular} Income Statements for the Fiscal Years Ended January 31 (amounts in millions; allow for rounding) (Integrative Case 1.1) Cost of goods sold Gross Profit Selling, general, and administrative expenses Operating Profit Interest income Interest expense Income before Tax Income tax expense Income (Loss) from discontinued operations Net Income Net income attributable to noncontrolling interests Net Income Attributable to Common Shareholders Other comprehensive income items Comprehensive Income \begin{tabular}{rrr} \hline 2014 & 2015 & 2016 \\ $476,294 & $485,651 & $482,130 \\ 358,069 & 365,086 & 360,984 \\ \hline$118,225 & $120,565 & $121,146 \\ 91,353 & 93,418 & 97,041 \\ \hline$26,872 & $27,147 & $24,105 \\ 1119 & 113 & 81 \\ \hline(2,335) & (2,461) & (2,548) \\ \hline$24,656 & $24,799 & $21,638 \\ 8,105 & 7,985 & 6,558 \\ \hline 144 & 285 & \\ \hline$16,695 & $17,099 & $15,080 \\ \hline(673) & (736) & (386) \\ \hline$16,022 & $16,363 & $14,694 \\ (2,409) & (4,172) & (4,429) \\ \hline$13,613 & $12,191 & $10,265 \\ \hline \end{tabular} Source. Wal-Mart Stores, Inc. Forms 10-K for the three fiscal years ended January 31, 2014, 2015, and 2016