Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. on january 1, 2017, abbey acquires 90 percent of b

On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for...

50.1K

Verified Solution

Question

Accounting

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

  1. 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?

  2. 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 & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students