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Clarke has a controlling interest in Rogers's outstanding stock. At the current year-end, the following information has been accumulated for these two companies:

	Separate Operating Income	Dividends Paid
Clarke	$722,500	$100,000
	(includes a $188,000 net unrealized gross profit in intra-entity ending inventory)
Rogers	267,500	85,000

Clarke uses the initial value method to account for the investment in Rogers. The separate operating income figures just presented include neither dividend nor other investment income. The effective tax rate for both companies is 40 percent.

d. Assume that Clarke owns 70 percent of Rogers's voting stock, requiring separate tax returns. What is the total amount of income tax expense to be recognized in the consolidated income statement for the current period?

Q-n: B

Q-n: C

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	$	(784,000	)	$	(890,000	)
Operating expenses		540,000			546,000
Intra-entity gross profits in ending inventory (included in above figures)		(122,000	)		(235,000	)
Dividend incomeBenjamin Company		(9,000	)		(40,500	)
Benjamin Company:
Sales		(275,000	)		(284,000	)
Operating expenses		156,000			182,000
Dividends paid		(10,000	)		(45,000	)

Assume that a tax rate of 40 percent is applicable to both companies.

Assume that a tax rate of 40 percent is applicable to both companies.

Answer is complete but not entirely correct. a b. c. d. Income tax Income tax Total amount of income tax Total amount of income tax expense Income tax $ 320,800 $ 320,800 $ 396,000 $ (364,988) $ 293,760 e. On January 1, 2016, Alpha acquired 80 percent of Delta. Of Delta's total business fair value, $138,000 was allocated to copyrights with a 20-year remaining life. Subsequently, on January 1, 2017, Delta obtained 70 percent of Omega's outstanding voting shares. In this second acquisition, $164,400 of Omega's total business fair value was assigned to copyrights that had a remaining life of 12 years. Delta's book value was $647,500 on January 1, 2016 and Omega reported a book value of $140,500 on January 1, 2017 Delta has made numerous inventory transfers to Alpha since the business combination was formed. Intra-entity gross profits of $15,300 were present in Alpha's inventory as of January 1, 2018. During the year, $231,000 in additional intra-entity sales were made with $25,410 in Intra-entity gross profits in inventory remaining at the end of the period. Both Alpha and Delta utilized the partial equity method to account for their investment balances. Following are the individual financial statements for the companies for 2018 with consolidated totals. Alpha Company $ (999, 800) 531,000 371,000 (223,200) $ (321, 000) Delta Company $ (672, 300) 294,000 149,000 (49, 700) $ (279, 000) Omega Company $ (264,500) 143,000 50, 500 O $ (71,000) Consolidated Totals $(1,705,600) 747, 110 591,100 Sales Cost of goods sold Operating expenses Income of subsidiary Separate company net income Consolidated net income Net income attributable to noncontrolling interest (Delta Company) Net income attributable to noncontrolling interest (Omega Company) Net income attributable to Alpha Company $ (367,390) 50,480 17, 190 $ (299, 720) $ (750,000) (321,000) 50,000 $(1,021, 000) $ 164,900 381,000 843, 600 $ (557,500) (279, 000) 40,000 $ (796,500) $ 526, 370 345,000 $ (100,500) (71,000) 50,000 $ (121,500) $ 23,500 188,000 $ (299, 720) (719, 048) (299,720) 50,000 $ (968, 768) $ 714, 770 888, 590 Net income attributable to Alpha Company Retained earnings, 1/1/18 Net income (above) Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Delta Company Investment in Omega Company Property, plant, and equipment Copyrights Total assets Liabilities Common stock Retained earnings, 12/31/18 Noncontrolling interest in Delta Company, 12/31/18 Noncontrolling interest in Omega Company, 12/31/18 Total liabilities and equities 464,000 270,130 367,500 308,000 $ 1,853,500 $ (632,500) (200,000) (1,021, 000) $ 1,509,000 $ (592,500) (120, 000) (796,500) 0 0 $(1,509, 000) $ 519,500 $ (298, 000) (100, 000) (121,500) 0 1,139,500 254,300 $ 2,997,160 $(1,523, 000) (200,000) (968, 768) (197,842) ( 107,550) $(2,997,160) $(1,853,500) $ (519,500) evelop the worksheet entries necessary to derive these reported balances: (If no entry is required for a transaction/event, select No journal entry required" in the first account field.) No Transaction Accounts Debit Credit 1 15,300 Retained earnings (Delta) Cost of goods sold . 15,300 2 2 Retained earnings (Delta) Investment in Omega olol 9,590 9,590 3 3 30.952 Retained earnings (Alpha) Investment in Delta 30,952 4. 4 100,000 100,500 Common stock (Omega) Retained earnings (Omega) Investment in Omega Noncontrolling interest in Omega 140,350 60,150 5 5 120,000 15.300 X Common stock (Delta) Retained earnings (Delta) Investment in Delta Noncontrolling interest in Delta OOOO 30,952 X 130,844 X b. On consolidated financial statements for 2018, what are the income tax expense and income tax currently payable if they choose to file separate returns? Answer is complete but not entirely correct. a. $ 133,200 $ 133,200 Income tax expense Income tax payable Income tax expense Income tax payable b. $ 133,200 $ 43,600 X