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): 2020 2021 Abbey Company: Sales$(698,000)$(1,000,000)Operating expenses 468,000 524,000 Intra-entity gross profits in ending inventory (included in above figures) (159,000) (171,000)Dividend income—Benjamin Company (9,000) (40,500)Benjamin Company: Sales (250,000) (289,000)Operating expenses 133,000 151,000 Dividends paid (10,000) (45,000) Assume that a tax rate of 21 percent is applicable to both companies. 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?On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns?1. Income tax expense:Income tax payable:2. Income tax expense:Income tax payable:

Calculation of income tax expense and income tax payable in case: if Abbey and Benjamin file a…

Answered: On January 1, 2020, Abbey acquires 90…

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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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):

		2020			2021
Abbey Company:
Sales	$	(698,000	)	$	(1,000,000	)
Operating expenses		468,000			524,000
Intra-entity gross profits in ending inventory (included in above figures)		(159,000	)		(171,000	)
Dividend income—Benjamin Company		(9,000	)		(40,500	)
Benjamin Company:
Sales		(250,000	)		(289,000	)
Operating expenses		133,000			151,000
Dividends paid		(10,000	)		(45,000	)

Assume that a tax rate of 21 percent is applicable to both companies.

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?
On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file separate returns?

1. Income tax expense:

Income tax payable:

2. Income tax expense:

Income tax payable:

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