Question
In: Accounting
On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years of 2017 and 2018 follows:
| 2017 | 2018 | |||||
| Abbey Company: | ||||||
| Sales | $ | (729,000 | ) | $ | (926,000 | ) |
| Operating expenses | 486,000 | 556,000 | ||||
| Intra-entity gross profits in ending inventory (included in above figures) | (215,000 | ) | (233,000 | ) | ||
| Dividend income—Benjamin Company | (9,000 | ) | (40,500 | ) | ||
| Benjamin Company: | ||||||
| Sales | (253,000 | ) | (320,000 | ) | ||
| Operating expenses | 142,000 | 156,000 | ||||
| Dividends paid | (10,000 | ) | (45,000 | ) | ||
Assume that a tax rate of 40 percent is applicable to both companies.
-
On consolidated financial statements for 2018, 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 2018, what are the income tax expense and income tax currently payable if they choose to file separate returns?
Solutions
Expert Solution
| Abbey Company | Benjamin Company | Consolidated | ||||
| 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | |
| Sales | 7,29,000.00 | 9,26,000.00 | 2,53,000.00 | 3,20,000.00 | 9,82,000.00 | 12,46,000.00 |
| Less:Operating Expenses | (4,86,000.00) | (5,56,000.00) | (1,42,000.00) | (1,56,000.00) | (6,28,000.00) | (7,12,000.00) |
| Less:Intra-entity gross profits in ending inventory | (2,15,000.00) | (2,33,000.00) | ||||
| Trading Profit | 2,43,000.00 | 3,70,000.00 | 1,11,000.00 | 1,64,000.00 | 1,39,000.00 | 3,01,000.00 |
| Income tax | 97,200.00 | 1,48,000.00 | 44,400.00 | 65,600.00 | 55,600.00 | 1,20,400.00 |
| Dividends Received Deduction 100% | 9,000.00 | 40,500.00 |
ekkarill92 answered 1 year agoRelated Solutions
On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's
outstanding shares. Financial information for these two companies
for the years of 2017 and 2018 follows:
2017
2018
Abbey Company:
Sales
$
(817,000
)
$
(1,086,000
)
Operating expenses
546,000
630,000
Intra-entity gross profits in ending inventory (included in
above figures)
(175,000
)
(181,000
)
Dividend income—Benjamin Company
(22,500
)
(27,000
)
Benjamin Company:
Sales
(280,000
)
(386,000
)
Operating expenses
135,000
195,000
Dividends paid
(25,000
)
(30,000
)
Assume...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's
outstanding shares. Financial information for these two companies
for the years of 2017 and 2018 follows: 2017 2018 Abbey Company:
Sales $ (771,000 ) $ (916,000 ) Operating expenses 542,000 596,000
Intra-entity gross profits in ending inventory (included in above
figures) (152,000 ) (201,000 ) Dividend income—Benjamin Company
(13,500 ) (31,500 ) Benjamin Company: Sales (281,000 ) (353,000 )
Operating expenses 137,000 181,000 Dividends paid (15,000 ) (35,000
) Assume...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's
outstanding shares. Financial information for these two companies
for the years of 2017 and 2018 follows:
2017
2018
Abbey Company:
Sales
$
(500,000
)
$
(700,000
)
Operating expenses
300,000
400,000
Intra-entity gross profits in
ending inventory (included in above figures)
(120,000
)
(150,000
)
Dividend income—Benjamin
Company
(18,000
)
(36,000
)
Benjamin Company:
Sales
(210,000
)
(270,000
)
Operating expenses
130,000
170,000
Dividends paid
(20,000
)
(40,000
)
Assume...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these...
On January 1, 2017,
Abbey acquires 90 percent of Benjamin's outstanding shares.
Financial information for these two companies for the years of 2017
and 2018 follows:
Abbey Company:
2017 2018
Sales
$
(776,000)
$ (1,114,000)
Operating expenses
488,000
674,000
Intra-entity gross profits in ending
inventory (included in
above figures)
(137,000)
(164,000)
Dividend income—Benjamin Company
(18,000)
(36,000)
Benjamin Company:
Sales
(207,000)
(330,000)
Operating expenses
121,000
191,000
Dividends paid
(20,000)
(40,000)
Assume that a tax
rate of 40 percent is applicable...
On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years of 2017 and 2018 follows:
On January 1, 2017, Abbey acquires 90 percent of Benjamin's
outstanding shares. Financial information for these two companies
for the years of 2017 and 2018 follows:2017 2018Abbey Company:Sales $ (684,000 ) $ (1,004,000 )Operating expenses 462,000 516,000Intra-entity gross profits in ending inventory (included in
above figures) (213,000 ) (247,000 )Dividend income—Benjamin Company (13,500 ) (31,500 )Benjamin Company:Sales (307,000 ) (361,000 )Operating expenses 162,000 209,000Dividends paid (15,000) (35,000 )Assume that a tax rate of 40 percent is applicable to both
companies....
On January 1, 2013, Piranto acquires 90 percent of Slinton’s outstanding shares. Financial information for these...
On January 1, 2013, Piranto acquires 90 percent of Slinton’s
outstanding shares. Financial information for these two companies
for the years of 2013 and 2014 follows:
Note: Parentheses indicate a credit balance.
2013
2014
Piranto Company:
Sales
$
(729,000
)
$
(926,000
)
Operating expenses
486,000
556,000
Unrealized gross profits as
of end of year
(included in above
figures)
(215,000
)
(233,000
)
Dividend income—Slinton
Company
(9,000
)
(40,500
)
Slinton Company:
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(253,000
)
(320,000
)
Operating...
On January 1, 2013, Piranto acquires 90 percent of Slinton’s outstanding shares. Financial information for these...
On January 1, 2013, Piranto acquires 90 percent of Slinton’s
outstanding shares. Financial information for these two companies
for the years of 2013 and 2014 follows: Note: Parentheses indicate
a credit balance.
2013
2014
Piranto Company:
Sales
$
(683,000
)
$
(1,062,000
)
Operating expenses
446,000
594,000
Unrealized gross profits as
of end of year
(included in above
figures)
(169,000
)
(237,000
)
Dividend income—Slinton
Company
(9,000
)
(40,500
)
Slinton Company:
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(293,000
)
(359,000
)
Operating expenses
124,000...
Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for...
Anderson acquires 10 percent of the outstanding voting shares of
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Flynn acquires 100 percent of the outstanding voting shares of Macek Company on January 1, 2020....
Flynn acquires 100 percent of the outstanding voting shares of
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