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=$116,640
ekkarill92 answered 2 years agoRelated Solutions
Up and its 80 percent–owned subsidiary (Down) reported the following figures for the year ending December...
Up and its 80 percent–owned subsidiary (Down) reported the
following figures for the year ending December 31, 2018. Down paid
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Up
Down
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$
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$
(430,000
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Cost of goods sold
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86,000
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in 2017, intra-entity gross profits of $43,000 on upstream
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Saloon
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Assets
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$
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Retained Earnings
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Following are separate income statements for Austin, Inc., and its 80 percent owned subsidiary, Rio Grande...
Following are separate income statements for Austin, Inc., and
its 80 percent owned subsidiary, Rio Grande Corporation as well as
a consolidated statement for the business combination as a
whole.
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$
(760,000
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$
(540,000
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$
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Cost of goods sold
420,000
320,000
740,000
Operating expenses
120,000
66,000
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income
$
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$
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Consolidated net income
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Following are separate income statements for Austin, Inc., and its 80 percent owned subsidiary, Rio Grande...
Following are separate income statements for Austin, Inc., and
its 80 percent owned subsidiary, Rio Grande Corporation as well as
a consolidated statement for the business combination as a
whole.
Austin
Rio Grande
Consolidated
Revenues
$
(739,000
)
$
(526,000
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$
(1,265,000
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Cost of goods sold
413,000
313,000
726,000
Operating expenses
114,000
83,000
235,000
Equity in earnings of Rio Grande
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Individual company net income
$
(282,000
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$
(130,000
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Consolidated net income
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The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:
The following separate income statements are for Burks Company
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acquisition-date fair value is $36,000 per year.Burks has convertible preferred stock outstanding. Each of these
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The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:...
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$
(420,000
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$
(320,000
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Expenses
344,000
235,000
Gain on sale of equipment
0
(25,000
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Equity earnings of
subsidiary
(62,000
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0
Net income
$
(138,000
)
$
(110,000
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Outstanding common shares
60,000
30,000
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Amortization expense resulting from Foreman’s excess
acquisition-date fair value is $35,000 per year.
Burks has convertible preferred stock outstanding. Each of these...
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:...
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and its 80 percent–owned subsidiary, Foreman Company: Burks Foreman
Revenues $ (448,000 ) $ (348,000 ) Expenses 273,000 249,000 Gain on
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) 0 Net income $ (248,000 ) $ (138,000 ) Outstanding common shares
60,000 40,000
Additional Information Amortization expense resulting from
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Burks has convertible preferred stock outstanding. Each of these...
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:...
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and its 80 percent–owned subsidiary, Foreman Company:
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Revenues
$
(438,000
)
$
(338,000
)
Expenses
270,000
244,000
Gain on sale of equipment
0
(34,000
)
Equity earnings of
subsidiary
(68,000
)
0
Net income
$
(236,000
)
$
(128,000
)
Outstanding common shares
65,000
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Additional Information
Amortization expense resulting from Foreman’s excess
acquisition-date fair value is $41,000 per year.
Burks has convertible preferred stock outstanding. Each of these...
The following separate income statements are for Burks Company and its 80 percent–owned subsidiary, Foreman Company:...
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and its 80 percent–owned subsidiary, Foreman Company:
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Revenues
$
(400,000
)
$
(328,000
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Expenses
220,000
239,000
Gain on sale of equipment
0
(29,000
)
Equity earnings of subsidiary
(66,000
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0
Net income
$
(246,000
)
$
(118,000
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Outstanding common shares
70,000
36,000
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acquisition-date fair value is $34,000 per year.
Burks has convertible preferred stock outstanding. Each of
these...
Following are separate income statements for Austin, Inc., and its 80 percent–owned subsidiary, Rio Grande Corporation...
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a consolidated statement for the business combination as a whole
(credit balances indicated by parentheses).
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Rio Grande
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Revenues
$
(738,000
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$
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$
(1,276,000
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Cost of goods sold
438,000
262,000
700,000
Operating expenses
138,000
108,000
271,000
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$
(168,000
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