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 $645,000 Dividends Paid $110,000 Martin (includes a $115,000 net gross profit in intra-entity ending inventory) 380,000 Rowen 85,000 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. a. Assume that Martin owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income tax amount does this affiliated group pay for the current period? b. Assume that Martin owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount of income taxes does this affiliated group pay for the current period? c. Assume that Martin owns 65 percent of Rowen's voting stock, but the companies elect to file separate tax returns. What is the totall amount of income taxes that these two companies pay for the current period? d. 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.) e. 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?
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 $645,000 Dividends Paid $110,000 Martin (includes a $115,000 net gross profit in intra-entity ending inventory) 380,000 Rowen 85,000 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. a. Assume that Martin owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income tax amount does this affiliated group pay for the current period? b. Assume that Martin owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount of income taxes does this affiliated group pay for the current period? c. Assume that Martin owns 65 percent of Rowen's voting stock, but the companies elect to file separate tax returns. What is the totall amount of income taxes that these two companies pay for the current period? d. 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.) e. 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?
Chapter18: Corporations: Organization And Capital Structure
Section: Chapter Questions
Problem 26P
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I only need help with d and e, i'm confused how it works
Transcribed Image Text: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
$645,000
Dividends Paid
$110,000
Martin
(includes a $115,000 net gross profit in intra-entity ending
inventory)
380,000
Rowen
85,000
2215
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.
Bell
a. Assume that Martin owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income tax amount does
this affiliated group pay for the current period?
b. Assume that Martin owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount of income taxes
does this affiliated group pay for the current period?
c. Assume that Martin owns 65 percent of Rowen's voting stock, but the companies elect to file separate tax returns. What is the total
amount of income taxes that these two companies pay for the current period?
d. 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.)
e. 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?
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Transcribed Image Text:e. Assume that Martin owns 70 percent of Rowen's voting stock so that separate tax returns are
taxes does Martin have to pay for the current year?
Amount
a
Income tax
b.
Income tax
C.
Total amount of income tax
Total amount of income tax expense
Next >
d.
e. Income tax
MINIM
$
$
$
191,100
191, 100
215,250
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