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Class 26 Take Home Quiz for Lucent Case Assignment

Class 26 Take Home Quiz for Lucent Case Assignment - Acc...

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Acc 440 Class 26 Lucent Case Take Home Individual Quiz Name_______Eric Schneck _________ Section __2 __ 1. How important is managerial judgment in arriving at the proper valuation allowance? Explain your answer. Because management can decide this amount, this is a very important judgment. They have an easy opportunity to manage their earnings to help their financial statements. IF they keep valuation allowance low they can keep a large amount of deferred tax asset on their balance statement. 2. What are the three largest deferred tax assets listed on Lucent’s 2001 financial statements? How have they changed from 2000 to 2001? Net Operating Loss/Credit Carry Forwards, 240 to 2,538 increase of 958% Postretirement and other benefits, 2,352 to 2,386 increase of 1% Bad debt and customer financing reserves, 82 to 1004 increase of 1124% 3. Considering only the information in Lucent case A, do you believe Lucent should increase its valuation allowance for deferred tax assets? If so, by how much? Explain your reasons and support for your answer.
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