Question
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
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:
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|
| 2017 |
|
| 2018 |
|
| Abbey Company: |
|
|
|
|
|
|
| Sales | $ | (823,000 | ) | $ | (1,122,000 | ) |
| Operating expenses |
| 584,000 |
|
| 698,000 |
|
| Intra-entity gross profits in ending inventory (included in above figures) |
| (202,000 | ) |
| (234,000 | ) |
| Dividend incomeBenjamin Company |
| (18,000 | ) |
| (36,000 | ) |
| Benjamin Company: |
|
|
|
|
|
|
| Sales |
| (265,000 | ) |
| (349,000 | ) |
| Operating expenses |
| 165,000 |
|
| 199,000 |
|
| Dividends paid |
| (20,000 | ) |
| (40,000 | ) |
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?
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