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The Assigned Case is entitled The What If" Effects of an Income Tax Rate Change"...

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Accounting

The Assigned Case is entitled The What If" Effects of an Income Tax Rate Change" published by Darden.

Read the assigned case and complete an analysis of the case.

Please include a write-up on how accounting for income taxes work.

1. Calculate and compare DuPont ratio analysis for SfS and Interactive Family Games (the peer)?

  1. SFS sales = 4,300,140, IFG sales = 3,850,700
  2. SFS Income Tax Expense = 86,003, IFG Income Tax Expense = 172,590
  3. SFS Net Income = 494,512, IFG Net Income = 466,630
  4. SFS Total Assets = 6,755,888, IFG total assets = 9,005,800
  5. SFS Owner's Equity = 2,704,710, IFG Owner's Equity = 2,923,100
  6. SFS Deferred Tax Asset = 440,800
  7. IFG Deferred Tax Liability = 900,580

2. Assume +/- 2%, +/-4% and +/-6% changes in the corporate income tax rate and revise the DuPont ratio analysis and the resulting EPS figures

3. Is it reasonable to require companies to adjust their deferred tax accounts based on new legislative rates? Why or why not?

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