Question
In: Accounting
Up and its 80 percent–owned subsidiary (Down) reported the following figures for the year ending December...
Up and its 80 percent–owned subsidiary (Down) reported the following figures for the year ending December 31, 2018. Down paid dividends of $54,000 during this period.
| Up | Down | ||||||
| Sales | $ | (1,080,000 | ) | $ | (540,000 | ) | |
| Cost of goods sold | 540,000 | 252,800 | |||||
| Operating expenses | 313,200 | 108,000 | |||||
| Dividend income | (43,200 | ) | 0 | ||||
| Net income | $ | (270,000 | ) | $ | (179,200 | ) | |
In 2017, intra-entity gross profits of $54,000 on upstream transfers of $162,000 were deferred into 2018. In 2018, intra-entity gross profits of $71,200 on upstream transfers of $196,400 were deferred into 2019.
-
What amounts appear for each line in a consolidated income statement?
-
What income tax expense should appear on the consolidated income statement if each company files a separate return? Assume that the tax rate is 30 percent.
Solutions
Expert Solution
A)- Amount appear in the consolidated income statment -
Consolidated sales =$1,080,000+540,000-196400=$1,423,600
Consolidated COGS- $540000+252800-(196400+54000)+71200=$613,600
Consoliodated operating expenses - $313200+108000=$421200
dividend - Consolidated income is zero as it eliminated in the consolidated process.
CONSOLIDATED NET INCOME -
| SALES | $1,423,600 |
| COGS | ($613600) |
| OPERATING EXPENSES | ($421200) |
| NET INCOME | $388,800 |
Consolidated balance for the non controlling interest
NCI-($179200+54000-71200)*20% =$32400
Controlling interest of the consolidated net income is = NET INCOME -NCI
Controlling interest =$388800-32400=$356400
B)- If each company files a seperate return-
COMPANY UP - for the company UP the amount owed to the government consist of the income less dividend ,Multiplied by the tax rate.
TAXES=(NET INCOME- DIVIDEND)*TAX RATE
=($270000-43200)*30%=$68,040
COMPANY DOWN- For the company down the amount owed to the government consist of only net income,multiplied by the tax rate
TAXES=(NET INCOME - DIVIDEND )*TAX RATETAXES=($179200-0)*30% =$53760
INCOME TAX PAYABLE=COMPANY UP+COMPANY DOWN
=$68040+53760=$121800
There is deferred tax asset arise =
TAX ASSET=($71200-54000)*30%=$5160
CONSOLIDATED INCOME TAX EXPENSES= $121800-5160=$116,640
ekkarill92 answered 1 year agoRelated Solutions
Up and its 80 percent–owned subsidiary (Down) reported the following figures for the year ending December...
Up and its 80 percent–owned subsidiary (Down) reported the
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a consolidated statement for the business combination as a
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Revenues
$
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$
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$
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413,000
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Operating expenses
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Expenses
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Equity earnings of
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Alford Company and its 80 percent–owned subsidiary, Knight, have the following income statements for 2018: Alford...
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