On January 1, 2020, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for thesetwo companies for the years 2020 and 2021 follows (credit balances indicated by parentheses):20202021Abbey Company:$ (500,000) $ (700,000)300,000SalesOperating expensesIntra-entity gross profits in endinginventory (included in above figures)Dividend income-Benjamin CompanyBenjamin Company:400,000(120,000)(18,000)(150,000)(36,000)(210,000)130,000(20,000)(270,000)170,000(40,000)SalesOperating expensesDividends paidAssume 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 currentlypayable 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 currentlypayable if they choose to file separate returns?

Data given: Abbey: Sales 2021 = $700,000 Operating expenses = $400,000…

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 $ (500,000) $ (700,000) 400,000 Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales 300,000 (120,000) (18,000) (150,000) (36,000) Operating expenses Dividends paid (210,000) 130,000 (20,000) (270,000) 170,000 (40,000) 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?

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 $ (500,000) $ (700,000) 400,000 Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales 300,000 (120,000) (18,000) (150,000) (36,000) Operating expenses Dividends paid (210,000) 130,000 (20,000) (270,000) 170,000 (40,000) 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?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

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:
$ (500,000) $ (700,000)
300,000
Sales
Operating expenses
Intra-entity gross profits in ending
inventory (included in above figures)
Dividend income-Benjamin Company
Benjamin Company:
400,000
(120,000)
(18,000)
(150,000)
(36,000)
(210,000)
130,000
(20,000)
(270,000)
170,000
(40,000)
Sales
Operating expenses
Dividends paid
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?

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On January 1, 2017, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years of 2017 and 2018 follows: 2017 2018 Abbey Company: Sales $ (684,000 ) $ (1,004,000 ) Operating expenses 462,000 516,000 Intra-entity gross profits in ending inventory (included in above figures) (213,000 ) (247,000 ) Dividend income—Benjamin Company (13,500 ) (31,500 ) Benjamin Company: Sales (307,000 ) (361,000 ) Operating expenses 162,000 209,000 Dividends paid (15,000 ) (35,000 ) Assume that a tax rate of 40 percent is applicable to both companies. On consolidated financial statements for 2018, 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 2018, what are the income tax expense and income tax currently…
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 Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Benjamin Company: Dividend income-Benjamin Company Operating expenses Dividends paid Sales $ (710,000) $ (1,102,000) 440,000 666,000 (125,000) (9,000) (222,000) (40,500) (328,000) 202,000 (10,000) (400,000) 230,000 (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?
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