Marta has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has been accumulated for these two companies: Company Separate Operating Income Dividends Paid Marta Rowen $500,000 (includes $90,000 net gross profit in intra-entity ending inventory) $ 90,000 240,000 80,000 Marta uses the initial value method to account for the investment in Rowen. The separate operating income figures just presented include neither dividend nor other investment income. The effective tax rate for both companies is 21 percent. Required: a. Assume that Marta owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income tax amount does this affiliated group pay for the current period? b. Assume that Marta owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount of income taxes does this affiliated group pay for the current period? c. Assume that Marta owns 80 percent of Rowen's voting stock, but the companies elect to file separate tax returns. What is the total amount of income taxes that these two companies pay for the current period? d. Assume that Marta owns 70 percent of Rowen's voting stock, requiring separate tax returns. What is the total amount of income tax expense to be recognized in the consolidated income statement for the current period? Note: Round your intermediate calculations and final answer to nearest whole dollar amount. e. Assume that Marta owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of income taxes does Marta have to pay for the current year? Amount a. Income tax 136,500 b. Income tax $ 136,500 c. Total amount of income tax $ 155,400 d. Total amount of income tax expense $ 146,255 e. Income tax
Marta has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has been accumulated for these two companies: Company Separate Operating Income Dividends Paid Marta Rowen $500,000 (includes $90,000 net gross profit in intra-entity ending inventory) $ 90,000 240,000 80,000 Marta uses the initial value method to account for the investment in Rowen. The separate operating income figures just presented include neither dividend nor other investment income. The effective tax rate for both companies is 21 percent. Required: a. Assume that Marta owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income tax amount does this affiliated group pay for the current period? b. Assume that Marta owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount of income taxes does this affiliated group pay for the current period? c. Assume that Marta owns 80 percent of Rowen's voting stock, but the companies elect to file separate tax returns. What is the total amount of income taxes that these two companies pay for the current period? d. Assume that Marta owns 70 percent of Rowen's voting stock, requiring separate tax returns. What is the total amount of income tax expense to be recognized in the consolidated income statement for the current period? Note: Round your intermediate calculations and final answer to nearest whole dollar amount. e. Assume that Marta owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of income taxes does Marta have to pay for the current year? Amount a. Income tax 136,500 b. Income tax $ 136,500 c. Total amount of income tax $ 155,400 d. Total amount of income tax expense $ 146,255 e. Income tax
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Marta has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has
been accumulated for these two companies:
Company
Separate Operating Income
Dividends
Paid
Marta
Rowen
$500,000 (includes $90,000 net gross profit
in intra-entity ending inventory)
$ 90,000
240,000
80,000
Marta uses the initial value method to account for the investment in Rowen. The separate operating income figures
just presented include neither dividend nor other investment income. The effective tax rate for both companies is 21
percent.
Required:
a. Assume that Marta owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income
tax amount does this affiliated group pay for the current period?
b. Assume that Marta owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount
of income taxes does this affiliated group pay for the current period?
c. Assume that Marta owns 80 percent of Rowen's voting stock, but the companies elect to file separate tax returns.
What is the total amount of income taxes that these two companies pay for the current period?
d. Assume that Marta owns 70 percent of Rowen's voting stock, requiring separate tax returns. What is the total
amount of income tax expense to be recognized in the consolidated income statement for the current period?
Note: Round your intermediate calculations and final answer to nearest whole dollar amount.
e. Assume that Marta owns 70 percent of Rowen's voting stock so that separate tax returns are required. What
amount of income taxes does Marta have to pay for the current year?
Amount
a. Income tax
136,500
b. Income tax
$
136,500
c. Total amount of income tax
$
155,400
d. Total amount of income tax expense
$
146,255
e. Income tax
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education