Arriba and its 80 percent-owned subsidiary (Abajo) reported the following figures for the year ending December 31, 2021 (credit balances indicated by parentheses). Abajo paid dividends of $34,000 during this period. Abajo $(340,000) 158,800 68,000 Arriba Sales Cost of goods sold Operating expenses Dividend income $(680,000) 340,000 197, 200 (27,200) $(170,000) Net income $(113,200) In 2020, intra-entity gross profits of $34,000 on upstream transfers of $102,000 were deferred into 2021. In 2021 intra-entity gross profits of $45,200 on upstream transfers of $124,400 were deferred into 2022. a. What amounts appear for each line in a consolidated income statement for the year ending December 31, 2021? b. What income tax expense should appear on the consolidated income statement if each company files a separate return? Assume that the tax rate is 21 percent.
Arriba and its 80 percent-owned subsidiary (Abajo) reported the following figures for the year ending December 31, 2021 (credit balances indicated by parentheses). Abajo paid dividends of $34,000 during this period. Abajo $(340,000) 158,800 68,000 Arriba Sales Cost of goods sold Operating expenses Dividend income $(680,000) 340,000 197, 200 (27,200) $(170,000) Net income $(113,200) In 2020, intra-entity gross profits of $34,000 on upstream transfers of $102,000 were deferred into 2021. In 2021 intra-entity gross profits of $45,200 on upstream transfers of $124,400 were deferred into 2022. a. What amounts appear for each line in a consolidated income statement for the year ending December 31, 2021? b. What income tax expense should appear on the consolidated income statement if each company files a separate return? Assume that the tax rate is 21 percent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Arriba and its 80 percent-owned subsidiary (Abajo) reported the following figures for the year ending December 31,
2021 (credit balances indicated by parentheses). Abajo paid dividends of $34,000 during this period.
Abajo
$(340,000)
158,800
68,000
Arriba
$(680,000)
340,000
197,200
(27,200)
Sales
Cost of goods sold
Operating expenses
Dividend income
Net income
$(170,000) $(113,200)
In 2020, intra-entity gross profits of $34,000 on upstream transfers of $102,000 were deferred into 2021. In 2021
intra-entity gross profits of $45,200 on upstream transfers of $124,400 were deferred into 2022.
a. What amounts appear for each line in a consolidated income statement for the year ending December 31, 2021?
b. What income tax expense should appear on the consolidated income statement if each company files a separate
return? Assume that the tax rate is 21 percent.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa92125e1-6c9a-413f-8430-8fbeeff84ac1%2F84aa8c22-da9e-4675-9746-534298f0aa77%2F50l78ao_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Arriba and its 80 percent-owned subsidiary (Abajo) reported the following figures for the year ending December 31,
2021 (credit balances indicated by parentheses). Abajo paid dividends of $34,000 during this period.
Abajo
$(340,000)
158,800
68,000
Arriba
$(680,000)
340,000
197,200
(27,200)
Sales
Cost of goods sold
Operating expenses
Dividend income
Net income
$(170,000) $(113,200)
In 2020, intra-entity gross profits of $34,000 on upstream transfers of $102,000 were deferred into 2021. In 2021
intra-entity gross profits of $45,200 on upstream transfers of $124,400 were deferred into 2022.
a. What amounts appear for each line in a consolidated income statement for the year ending December 31, 2021?
b. What income tax expense should appear on the consolidated income statement if each company files a separate
return? Assume that the tax rate is 21 percent.
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