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 Boxwood $385,000 100,000 Lake paid a $90,000 cash dividend during the current year, and Boxwood distributed $12,000. Boxwood sells inventory to Lake each period. Intra-entity gross profits of $22,200 were present in Lake's beginning inventory for the current year, and its ending inventory carried $36,700 in intra-entity 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? Total income tax expense b. Income tax payable-Lake Income tax payable-Boxwood Total income tax payable C. Income tax expense $ $ $ Amount 21,000 21,000 98,805
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 Boxwood $385,000 100,000 Lake paid a $90,000 cash dividend during the current year, and Boxwood distributed $12,000. Boxwood sells inventory to Lake each period. Intra-entity gross profits of $22,200 were present in Lake's beginning inventory for the current year, and its ending inventory carried $36,700 in intra-entity 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? Total income tax expense b. Income tax payable-Lake Income tax payable-Boxwood Total income tax payable C. Income tax expense $ $ $ Amount 21,000 21,000 98,805
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
Boxwood
Lake paid a $90,000 cash dividend during the current year, and Boxwood distributed $12,000.
Boxwood sells inventory to Lake each period. Intra-entity gross profits of $22,200 were present in Lake's beginning inventory for the
current year, and its ending inventory carried $36,700 in intra-entity gross profits.
View each of the following questions as an independent situation. The effective tax rate for both companies is 21 percent.
$385,000
100,000
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?
a.
b.
C.
Total income tax expense
Income tax payable-Lake
Income tax payable-Boxwood
Total income tax payable
Income tax expense
Amount
$ 21,000
$ 21,000
$
98,805
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