Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period, the two companies individually reported the following income (exclusive of any investment income): Lake Boxwood $ 329,000 110,000 Lake paid a $75,000 cash dividend during the current year, and Boxwood distributed $15,000. Boxwood sells Inventory to Lake each period. Intra-entity gross profits of $20,400 were present in Lake's beginning inventory for the current year, and its ending inventory carried $35,900 in intra-entity gross profits. View each of the following questions as an independent situation. The effective tax rate for both companies is 21 percent.
Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period, the two companies individually reported the following income (exclusive of any investment income): Lake Boxwood $ 329,000 110,000 Lake paid a $75,000 cash dividend during the current year, and Boxwood distributed $15,000. Boxwood sells Inventory to Lake each period. Intra-entity gross profits of $20,400 were present in Lake's beginning inventory for the current year, and its ending inventory carried $35,900 in intra-entity gross profits. View each of the following questions as an independent situation. The effective tax rate for both companies is 21 percent.
Chapter13: Comparative Forms Of Doing Business
Section: Chapter Questions
Problem 44P
Related questions
Question
Transcribed Image Text:Problem 7-22 (Algo) (LO 7-6)
Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period, the two companies individually
reported the following income (exclusive of any investment income):
Lake
Boxwood
Lake paid a $75,000 cash dividend during the current year, and Boxwood distributed $15,000.
Boxwood sells Inventory to Lake each period. Intra-entity gross profits of $20,400 were present in Lake's beginning inventory for the
current year, and its ending inventory carried $35,900 in intra-entity gross profits.
View each of the following questions as an independent situation. The effective tax rate for both companies is 21 percent.
$ 329,000
110,000
a. If Lake owns a 60 percent interest in Boxwood, what total income tax expense must be reported on a consolidated income statement
for this period? (Round the Intermediate calculations and final answers to the nearest dollar amount.)
b. If Lake owns a 60 percent interest in Boxwood, what total amount of income taxes must be paid by these two companies for the
current year? (Round the Intermediate calculations and final answers to the nearest dollar amount.)
c. If Lake owns a 90 percent interest in Boxwood and a consolidated tax return is filed, what amount of income tax expense would be
reported on a consolidated income statement for the year?
a.
b.
C.
Answer is complete but not entirely correct.
Total income tax expense
Income tax payable-Lake
Income tax payable-Boxwood.
Total income tax payable
Income tax expense
$
$
$
$
$
Amount
72,765 ✪
69,845
23,100
92,945
88,935
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Income tax:
VIEWStep 2: (a) Determine the total income tax expense must be reported on a consolidated income statement:
VIEWStep 3: (b) Determine the total amount of income taxes must be paid by these two companies for current year:
VIEWStep 4: (c) Determine the amount of income tax expense to be reported on a consolidated income statement:
VIEWSolution
VIEW
Step by step
Solved in 5 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you