Martin has a controlling interest in Rowen’s outstanding stock. At the current year-end, the following information has been accumulated for these two companies: Separate Operating Income Dividends Paid Martin $500,000 $90,000 (includes a $90,000 net gross profit in intra-entity ending inventory) Rowen 240,000 80,000
Martin has a controlling interest in Rowen’s outstanding stock. At the current year-end, the following information has been accumulated for these two companies:
| Separate Operating Income | Dividends Paid | |
| Martin | $500,000 | $90,000 |
| (includes a $90,000 net gross profit in intra-entity ending inventory) | ||
| Rowen | 240,000 | 80,000 |
Martin uses the initial value method to account for the investment in Rowen. The separate operating income figures just presented include neither dividend nor other investment income. The effective tax rate for both companies is 21 percent.
-
Assume that Martin owns 70 percent of Rowen’s voting stock, requiring separate tax returns. What is the total amount of income tax expense to be recognized in the consolidated income statement for the current period? (Round your intermediate calculations and final answer to nearest whole dollar amount.)
-
Assume that Martin owns 70 percent of Rowen’s voting stock so that separate tax returns are required. What amount of income taxes does Martin have to pay for the current year?
Step by step
Solved in 4 steps with 2 images
