Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period, the two companies individually reported the following income (exclusive of any investment income): Lake $ 390,000 Boxwood $ 100,000 Lake paid a $55,000 cash dividend during the current year, and Boxwood distributed $5,000. Boxwood sells inventory to Lake each period. Intra-entity gross profits of $24,100 were present in Lake's beginning inventory for the current year, and its ending inventory carried $38,100 in intraentity gross profits. View each of the following questions as an independent situation. The effective tax rate for both companies is 21 percent. a. If Lake owns a 60 percent interest in Boxwood, what total income tax expense must be reported on a consolidated income statement for this period? (Round the intermediate calculations and final answers to the nearest dollar amount.) b. If Lake owns a 60 percent interest in Boxwood, what total amount of income taxes must be paid by these two companies for the current year? (Round the intermediate calculations and final answers to the nearest dollar amount.) c. If Lake owns a 90 percent interest in Boxwood and a consolidated tax return is filed, what amount of income tax expense would be reported on a consolidated income statement for the year? Amount a. Total income tax expense b. Income tax payable-- Lake Income Tax Payable-- Boxwood Total Income tax payable c. Income tax expense
Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period,
the two companies individually reported the following income (exclusive of any investment
income):
| Lake | $ 390,000 |
| Boxwood | $ 100,000 |
Lake paid a $55,000 cash dividend during the current year, and Boxwood distributed $5,000.
Boxwood sells inventory to Lake each period. Intra-entity gross profits of $24,100 were present in
Lake's beginning inventory for the current year, and its ending inventory carried $38,100 in intraentity gross profits.
View each of the following questions as an independent situation. The effective tax rate for both
companies is 21 percent.
a. If Lake owns a 60 percent interest in Boxwood, what total income tax expense must be reported
on a consolidated income statement for this period? (Round the intermediate calculations
and final answers to the nearest dollar amount.)
b. If Lake owns a 60 percent interest in Boxwood, what total amount of income taxes must be paid
by these two companies for the current year? (Round the intermediate calculations and final
answers to the nearest dollar amount.)
c. If Lake owns a 90 percent interest in Boxwood and a consolidated tax return is filed, what
amount of income tax expense would be reported on a consolidated income statement for the
year?
| Amount | ||
| a. | Total income tax expense | |
| b. | Income tax payable-- Lake | |
| Income Tax Payable-- Boxwood | ||
| Total Income tax payable | ||
| c. | Income tax expense |
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