QUESTION 3 Partially correct Mark 0.88 out of 5.00 Flag question Analyzing and Interpreting Tax Footnote Fischer, Inc. reports total tax expense on its income statement for year ended December 31, 2010 of $161,768 and cash paid for taxes of $155,092. The tax footnote in the company's 10-K filing, reports the following deferred tax information. Deferred tax assets and liabilities consisted of the following (in thousands) December 31 (S thousands) 2010 2009 Deferred tax assets State tax credits, net of federal tax impact Tax basis inventory adjustment Inventory obsolescence reserves Allowance for doubtful accounts and other reserves Foreign net operating loss carryforward Stock-based compensation Intangible asset Deferred rent Deferred compensation Other Total deferred tax assets Less: valuation allowance Total net deferred tax assets Deferred tax liabilities Prepaid expenses Property, plant and equipment Total deferred tax liabilities Total deferred tax assets, net 7,000 7,496 9,056 11,200 28,168 3,66837,904 5,10 21,800 4,272 1,900 6,912 5,796 4,420 0,836 12,604 173,096 134,776 12,208 35,984 1,488 (3,530) 169,566 134,776 (7,460 (4,532) 12416 (23,132) 19,876 (27,664) $149,690 107,112 (a) Did Fischer's deferred tax assets increase or decrease during the most recent fiscal year? Fischer's deferred tax assets increased by $ 0 Which of the following best summarizes our interpretation of an increase in a company's deferred x (thousands) tax assets for the most recent year? Deferred tax assets increased during the year, which means that the company reported more as a tax expense on its income statement than it paid in taxes Deferred tax assets generally arise when tax deductions are less than tax expense reported in the income statement. Because deferred tax assets increased, we can concluded that tax deductions were greater than expense. Deferred tax assets increased during the year, which means that the company paid more taxes than it reported as the tax expense on its income statement. Deferred tax assets increased during the year, which means that the company's taxable income was less than in the prior year Mark 1.00 out of 1.00 (b) Did Fischer's deferred tax liabilities increase or decrease during the most recent fiscal year? Fischer's deferred tax liabilities decreased by S 0 X (thousands. (b) Did Fischer's deferred tax liabilities increase or decrease during the most recent fiscal year? Fischer's deferred tax liabilities decreasedby $ 0x (thousands). Which of the following statements best describes the reason for the change in deferred tax liabilities during the most recent year? The deferred tax liabilities increased during the recent year because they paid down their tax liability The deferred tax liabilities decreased during the recent year possibly because the company is now depreciating its fixed assets more for GAAP purposes than it is for tax purposes. The deferred tax liabilities decreased during the recent year as a result of the reduction in its effective tax rate. The deferred tax liabilities decreased during the recent year because the company's taxable income was less than in prior year. Mark 1.00 out of 1.00 What proportion of the foreign net operating losses does the company believe will likely expine unused? Round your answer to the nearest percent. (d) Explain how the valuation allowance affected 2010 net income. Fischer's valuation allowance account increased during the year, which means net income increased Fischer's valuation allowance account decreased during the year, which means net income increased Fischer's valuation allowance account increased during the year, which means net income decreased. Fischer's valuation allowance account decreased during the year, which means net income decreased Mark 1.00 out of 1.00 (e) Use the financial statement effects template to record Fischer's income tax expense for the current fiscal year along with the changes in both deferred tax assets and liabilities. Assume that income taxes payable increased by $49,254 thousand Use negative signs with answers, when appropriate Balance Sheet Noncash Contributed Earned Transaction Cash Asset+ Liabilities CapitalCapital Assets Record tax expense, part cash and part deferred Income Statement Net Income Revenue Expenses Check