Question
On January 1, 2020, Abbey acquires 90 percent of Benjamins outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows
On January 1, 2020, Abbey acquires 90 percent of Benjamins outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses):
| 2020 | 2021 | |||||
| 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 incomeBenjamin 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 that a tax rate of 21 percent is applicable to both companies.
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On consolidated financial statements for 2021, 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?
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On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns?
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Auditing and Assurance Services A Systematic Approach
Authors: William Messier, Steven Glover, Douglas Prawitt
9th edition
1308361491, 77862333, 978-1259248290, 9780077862336, 1259162346, 978-1259162343
