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

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Accounting

On January 1, 2017,Abbey acquires 90 percent of Benjamin's outstanding shares.Financial information for these two companies for the years of 2017and 2018 follows:
Abbey Company:
   2017 2018
Sales
$    (776,000)
$ (1,114,000)
Operating expenses
488,000
674,000
Intra-entity gross profits in endinginventory (included in
above figures)
(137,000)
(164,000)
Dividend income—Benjamin Company
(18,000)
(36,000)
Benjamin Company:
Sales
(207,000)
(330,000)
Operating expenses
121,000
191,000
Dividends paid
(20,000)
(40,000)
Assume that a taxrate of 40 percent is applicable to both companies :
On consolidated financial statements for 2018, what are theincome tax expense and the income tax currently payable if Abbeyand Benjamin file a consolidated tax return as an affiliatedgroup?
On consolidated financial statements for 2018, what are theincome tax expense and income tax currently payable if they chooseto file separate returns?
a. Income tax expense
   Income tax payable
b. Income tax expense
   Income tax payable

Answer & Explanation Solved by verified expert

3.9 Ratings (587 Votes)

Part A Consolidated Returns 2018 Abbey income 2018 sales less expenses440000 Benjamin income 2018 sales less expenses139000 Numbers may differ from below refer the points 2017 gain realized in 2018185000 2018 deferred gain 232000 See Answer

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Sales	$ (776,000)	$ (1,114,000)
Operating expenses	488,000	674,000
Intra-entity gross profits in endinginventory (included in
above figures)	(137,000)	(164,000)
Dividend income—Benjamin Company	(18,000)	(36,000)