The following partial income statement and income tax note excerpts were taken from Sirius XM Inc.s 2012 Form 10-K.

During 2012, Sirius XM eliminated most of the valuation allowance it had built up, reducing it to $9.8 million at December 31, 2012.

You are forecasting Sirius XMs earnings for 2013. Your best estimate is that income before income taxes will be up 5% relative to 2012. You believe there will be no tax law changes in 2013. You also believe that in 2013 Sirius XM will eliminate the remainder of its valuation allowance and that its effective income tax rate will be unchanged except for the effects of the valuation allowance reversals in 2012 and 2013.

Required:

1. Forecast Sirius XMs 2013 income before income taxes.

2. What was Sirius XMs effective tax rate in 2012?

3. What would Sirius XMs effective tax rate have been in 2012 if not for the valuation allowance reversal?

4. Assume you expect Sirius XMs 2013 adjusted effective income tax rate to equal its 2012 adjusted effective tax rate where the adjusted effective income tax rate is the effective income tax rate excluding the impact of changes in the valuation allowance on the income tax provision. Forecast Sirius XMs 2013 income tax expense, assuming it eliminates the remainder of its valuation allowance in that year.

5. Forecast Sirius XMs 2013 net income.