(a) To realize a sizable deferred tax liability, Acme must have used an accelerated depreciation method for tax。<br>purposes while using straight-line depreciation for its financial statements.Once the temporary difference。<br>reversed, taxable income would exceed financial accounting income.Acme would be required to pay the。<br>taxes it "deferred" from the years when tax depreciation exceeded book depreciation.To stop this from。<br>happening, Acme would have to sell these plant assets.It probably would have to report a gain on sale, but。<br>it likely would be taxed at the favorable capital gains rates.If Acme buys new plant assets and again uses。<br>accelerated depreciation for tax purposes and straight-line for books, it will perpetuate a "deferral" of income。<br>taxes.<br>(b) The deferral of income taxes means that due to temporary differences caused by the difference in financial。<br>accounting principles and tax laws, a company will be able to defer paying its income taxes (or reaping an。<br>income tax benefit) until future periods.The practice of selling-off assets before the temporary difference。<br>reverses means that the company may pay a lesser amount of taxes to the government.Although some might。<br>be concerned that Acme is not paying its "fair share," Acme appears to be minimizing its taxes through a tax。<br>strategy plan which is perfectly legal.The taxing authority has chosen to provide these incentives and there。<br>is nothing wrong with Acme deferring the payable.<br>(c) The primary stakeholders who could be harmed by Acme's income tax practice are the federal government,<br>which receives fewer taxes as a result of this practice.Ultimately, other taxpayers have to pay more.In。<br>addition, if replacement plant assets are very costly to acquire, positive cash flow is reduced.Though the impact。<br>should not be great, investors and creditors are affected negatively.<br>(d) As a public accountant, Stephanie is obligated to uphold objectivity and integrity in the practice of financial。<br>reporting.If she thinks that this practice is unethical, then she needs to communicate her concerns to the。<br>highest levels of management within Acme, including members of the Board of Directors and/or the Audit。<br>Committee.However, it would appear here that Acme is simply trying to minimize its income taxes which。<br>should not be considered unethical. ...
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