Garrison holds a controlling interest in Robertson's outstanding stock. For the current year, the following information has been gathered about these two companies: Separate operating income Garrison $ 300,000 Robertson $ 200,000 (includes $50,000 intra-entity gross profit in ending inventory) Dividends paid Tax rate 32,000 21% 50,000 21% Garrison uses the initial value method to account for the investment in Robertson. Garrison's separate operating income figure does not include dividend income for the current year. a. Assume that Garrison owns 80 percent of Robertson's voting stock. On a consolidated tax return, what amount of income tax is paid? b. Assume that Garrison owns 80 percent of Robertson's voting stock. On separate tax returns, what total amount of income tax is paid? c. Assume that Garrison owns 70 percent of Robertson's voting stock. What total amount of income tax expense does a consolidated income statement recognize? (Round your Intermediate calculations and final answer to nearest whole dollar amount.) d. Assume that Garrison holds 60 percent of Robertson's voting stock. On a separate income tax return, what amount of income tax does Garrison have to pay? a. Taxes to be paid b. Total taxes to be paid C. Total expense to be reported d. Total income taxes payable Amount
Garrison holds a controlling interest in Robertson's outstanding stock. For the current year, the following information has been gathered about these two companies: Separate operating income Garrison $ 300,000 Robertson $ 200,000 (includes $50,000 intra-entity gross profit in ending inventory) Dividends paid Tax rate 32,000 21% 50,000 21% Garrison uses the initial value method to account for the investment in Robertson. Garrison's separate operating income figure does not include dividend income for the current year. a. Assume that Garrison owns 80 percent of Robertson's voting stock. On a consolidated tax return, what amount of income tax is paid? b. Assume that Garrison owns 80 percent of Robertson's voting stock. On separate tax returns, what total amount of income tax is paid? c. Assume that Garrison owns 70 percent of Robertson's voting stock. What total amount of income tax expense does a consolidated income statement recognize? (Round your Intermediate calculations and final answer to nearest whole dollar amount.) d. Assume that Garrison holds 60 percent of Robertson's voting stock. On a separate income tax return, what amount of income tax does Garrison have to pay? a. Taxes to be paid b. Total taxes to be paid C. Total expense to be reported d. Total income taxes payable Amount
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Garrison holds a controlling interest in Robertson's outstanding stock. For the current year, the following information has been
gathered about these two companies:
Separate operating income
Garrison
$ 300,000
Robertson
$ 200,000
(includes $50,000 intra-entity gross profit
in ending inventory)
Dividends paid
Tax rate
32,000
21%
50,000
21%
Garrison uses the initial value method to account for the investment in Robertson. Garrison's separate operating income figure does
not include dividend income for the current year.
a. Assume that Garrison owns 80 percent of Robertson's voting stock. On a consolidated tax return, what amount of income tax is
paid?
b. Assume that Garrison owns 80 percent of Robertson's voting stock. On separate tax returns, what total amount of income tax is
paid?
c. Assume that Garrison owns 70 percent of Robertson's voting stock. What total amount of income tax expense does a consolidated
income statement recognize? (Round your Intermediate calculations and final answer to nearest whole dollar amount.)
d. Assume that Garrison holds 60 percent of Robertson's voting stock. On a separate income tax return, what amount of income tax
does Garrison have to pay?
a.
Taxes to be paid
b.
Total taxes to be paid
C.
Total expense to be reported
d.
Total income taxes payable
Amount
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