On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses): 2020 2021 Abbey Company: Sales $ (698,000 ) $ (1,000,000 ) Operating expenses 468,000 524,000 Intra-entity gross profits in ending inventory (included in above figures) (159,000 ) (171,000 ) Dividend income—Benjamin Company (9,000 ) (40,500 ) Benjamin Company: Sales (250,000 ) (289,000 ) Operating expenses 133,000 151,000 Dividends paid (10,000 ) (45,000 ) Assume that a tax rate of 21 percent is applicable to both companies. On consolidated financial statements for 2021, what are the income tax expense and the income tax currently payable if Abbey and Benjamin file a consolidated tax return as an affiliated group? On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns? 1. Income tax expense: Income tax payable: 2. Income tax expense: Income tax payable:
On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses): 2020 2021 Abbey Company: Sales $ (698,000 ) $ (1,000,000 ) Operating expenses 468,000 524,000 Intra-entity gross profits in ending inventory (included in above figures) (159,000 ) (171,000 ) Dividend income—Benjamin Company (9,000 ) (40,500 ) Benjamin Company: Sales (250,000 ) (289,000 ) Operating expenses 133,000 151,000 Dividends paid (10,000 ) (45,000 ) Assume that a tax rate of 21 percent is applicable to both companies. On consolidated financial statements for 2021, what are the income tax expense and the income tax currently payable if Abbey and Benjamin file a consolidated tax return as an affiliated group? On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns? 1. Income tax expense: Income tax payable: 2. Income tax expense: Income tax payable:
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses):
| 2020 | 2021 | |||||
| Abbey Company: | ||||||
| Sales | $ | (698,000 | ) | $ | (1,000,000 | ) |
| Operating expenses | 468,000 | 524,000 | ||||
| Intra-entity gross profits in ending inventory (included in above figures) | (159,000 | ) | (171,000 | ) | ||
| Dividend income—Benjamin Company | (9,000 | ) | (40,500 | ) | ||
| Benjamin Company: | ||||||
| Sales | (250,000 | ) | (289,000 | ) | ||
| Operating expenses | 133,000 | 151,000 | ||||
| Dividends paid | (10,000 | ) | (45,000 | ) | ||
Assume that a tax rate of 21 percent is applicable to both companies.
-
On consolidated financial statements for 2021, what are the income tax expense and the income tax currently payable if Abbey and Benjamin file a consolidated tax return as an affiliated group?
-
On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns?
1. Income tax expense:
Income tax payable:
2. Income tax expense:
Income tax payable:
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