Arriba and its 80 percentowned subsidiary (Abajo) reported the following figures for the year ending December 31,
Question:
Arriba and its 80 percent–owned subsidiary (Abajo) reported the following figures for the year ending December 31, 2021 (credit balances indicated by parentheses). Abajo paid dividends of $30,000 during this period.
In 2020, intra-entity gross profits of $30,000 on upstream transfers of $90,000 were deferred into 2021. In 2021 intra-entity gross profits of $40,000 on upstream transfers of $110,000 were deferred into 2022.
a. What amounts appear for each line in a consolidated income statement? Explain your computations.
b. What income tax expense should appear on the consolidated income statement if each company files a separate return? Assume that the tax rate is 21 percent
Step by Step Answer:
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik