Martin has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has been accumulated for these two companies: Martin Rowen Separate Operating Income. $630,000 (includes a $125,000 net gross profit in intra-entity ending inventory) 480,000 Martin 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. a. Assume that Martin 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? Dividends Paid $105,000 b. Assume that Martin 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? a 55,000 c. Assume that Martin 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? b. С d e d. Assume that Martin 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? (Round your intermediate calculations and final answer to nearest whole dollar amount.) e. Assume that Martin owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of income taxes does Martin have to pay for the current year? Answer is complete but not entirely correct. Amount $ 206,850 $206,850 C $ 233,100 $ 2,525,072 $ 135,130 Income tax Income tax Total amount of income tax Total amount of income tax expense Income tax
Martin has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has been accumulated for these two companies: Martin Rowen Separate Operating Income. $630,000 (includes a $125,000 net gross profit in intra-entity ending inventory) 480,000 Martin 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. a. Assume that Martin 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? Dividends Paid $105,000 b. Assume that Martin 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? a 55,000 c. Assume that Martin 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? b. С d e d. Assume that Martin 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? (Round your intermediate calculations and final answer to nearest whole dollar amount.) e. Assume that Martin owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of income taxes does Martin have to pay for the current year? Answer is complete but not entirely correct. Amount $ 206,850 $206,850 C $ 233,100 $ 2,525,072 $ 135,130 Income tax Income tax Total amount of income tax Total amount of income tax expense Income tax
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 18P
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Transcribed Image Text:Martin has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has been
accumulated for these two companies:
Martin
Rowen
Separate Operating Income
$630,000
(includes a $125,000 net gross profit in intra-entity.
ending inventory)
480,000
e
Martin 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.
a
b.
C
d
a. Assume that Martin owns 100 percent of Rowen's voting stock and is filling a consolidated tax return. What income tax amount does
this affiliated group pay for the current period?
b. Assume that Martin 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 Martin 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 Martin 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? (Round your intermediate calculations
and final answer to nearest whole dollar amount.)
e. Assume that Martin owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of income
taxes does Martin have to pay for the current year?
Dividends Paid
$105,000
Answer is complete but not entirely correct.
Amount
$206,850
$206,850
55,000
Income tax
Income tax
Total amount of income tax
Total amount of income tax expense
Income tax
$ 233,100
$ 2,525,072
$ 135,130
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