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On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses): Abbey Company: Sales Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales Operating expenses Dividends paid 2020 2021 $ (683,000) $ (1,062,000) 446,000 594,000 (169,000) (237,000) (9,000) (40,500) (293,000) (359,000) 124,000 (10,000) 194,000 (45,000) Assume that a tax rate of 21 percent is applicable to both companies. a. On consolidated financial statements for 2021, what are the income tax expense and the income tax currently payable if Abbey and Benjamin file a consolidated tax return as an affiliated group? b. On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns? a. Income tax expense Income tax payable b. Income tax expense Income tax payable Amount

On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses): Abbey Company: Sales Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales Operating expenses Dividends paid 2020 2021 $ (683,000) $ (1,062,000) 446,000 594,000 (169,000) (237,000) (9,000) (40,500) (293,000) (359,000) 124,000 (10,000) 194,000 (45,000) Assume that a tax rate of 21 percent is applicable to both companies. a. On consolidated financial statements for 2021, what are the income tax expense and the income tax currently payable if Abbey and Benjamin file a consolidated tax return as an affiliated group? b. On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns? a. Income tax expense Income tax payable b. Income tax expense Income tax payable Amount

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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am. 122.

On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses): Abbey Company: Sales Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales Operating expenses Dividends paid 2020 2021 $ (683,000) $ (1,062,000) 446,000 594,000 (169,000) (237,000) (9,000) (40,500) (293,000) (359,000) 124,000 (10,000) 194,000 (45,000) Assume that a tax rate of 21 percent is applicable to both companies. a. On consolidated financial statements for 2021, what are the income tax expense and the income tax currently payable if Abbey and Benjamin file a consolidated tax return as an affiliated group? b. On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns? a. Income tax expense Income tax payable b. Income tax expense Income tax payable Amount
Transcribed Image Text:On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2020 and 2021 follows (credit balances indicated by parentheses): Abbey Company: Sales Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales Operating expenses Dividends paid 2020 2021 $ (683,000) $ (1,062,000) 446,000 594,000 (169,000) (237,000) (9,000) (40,500) (293,000) (359,000) 124,000 (10,000) 194,000 (45,000) Assume that a tax rate of 21 percent is applicable to both companies. a. On consolidated financial statements for 2021, what are the income tax expense and the income tax currently payable if Abbey and Benjamin file a consolidated tax return as an affiliated group? b. On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns? a. Income tax expense Income tax payable b. Income tax expense Income tax payable Amount
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