On January 1, 2023, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies forthe years 2023 and 2024 follows (credit balances indicated by parentheses):Items20232024Abbey Company:SalesOperating expensesIntra-entity gross profits in ending inventory(included in above figures)Dividend income-Benjamin CompanyBenjamin Company:SalesOperating expensesDividends paid$ (790,000) $ (1,010,000)508,000632,000(149,000)(159,000)(18,000)(36,000)(327,000)(352,000)205,000221,000(20,000)(40,000)Assume that a tax rate of 21 percent is applicable to both companies.Required:a. On consolidated financial statements for 2024, what are the income tax expense and the income tax currently payable if Abbey andBenjamin file a consolidated tax return as an affiliated group?b. On consolidated financial statements for 2024, what are the income tax expense and income tax currently payable if they choose tofile separate returns?a. Income tax expensea. Income tax payableb. Income tax expenseb. Income tax payableAmount

Explanation of Income Tax Expense: This refers to the amount of tax calculated on a company's…

Answered: On January 1, 2023, Abbey acquires 90…

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter11: The Corporate Income Tax

Section: Chapter Questions

Problem 5P: Fisafolia Corporation has gross income from operations of $210,000 and operating expenses of...

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Fisafolia Corporation has gross income from operations of $210,000 and operating expenses of $160,000 for 2019. The corporation also has $30,000 in dividends from publicly traded domestic corporations in which the ownership percentage was 45 percent. Calculate the corporation's dividends received deduction for 2019. $_____________ Assume that instead of $210,000, Fisafolia Corporation has gross income from operations of $135,000. Calculate the corporation's dividends received deduction for 2019. $___________ Assume that instead of $210,000, Fisafolia Corporation has gross income from operations of $158,000. Calculate the corporation's dividends received deduction for 2019. $_____________
On January 1, 2023, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2023 and 2024 follows (credit balances indicated by parentheses): Items Abbey Company: Sales Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales a. Income tax expense a. Income tax payable b. Income tax expense b. Income tax payable 2023 Amount $ (785,000) $ (1,042,000) 536,000 662,000 (148,000) (22,500) 2024 (330,000) 167,000 (25,000) (168,000) (27,000) Operating expenses Dividends paid Assume that a tax rate of 21 percent is applicable to both companies. Required: a. On consolidated financial statements for 2024, 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 2024, what are the income tax expense and income…
On January 1, 2023, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2023 and 2024 follows (credit balances indicated by parentheses): Items Abbey Company: Sales 2023 2024 Operating expenses $ (683,000) 446,000 $ (1,062,000) 594,000 Intra-entity gross profits in ending inventory (included in above figures) Dividend income Benjamin Company (169,000) (9,000) (237,000) (40,500) Benjamin Company: Sales Operating expenses (293,000) (359,000) Dividends paid 124,000 (10,000) 194,000 (45,000) Assume that a tax rate of 21 percent is applicable to both companies. Required: a. On consolidated financial statements for 2024, 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 2024, what are the income tax expense and income tax currently payable if they choose to file separate returns? Amount…
On January 1, 2023, Abbey acquires 90 percent of Benjamin's outstanding shares. Financial information for these two companies for the years 2023 and 2024 follows (credit balances indicated by parentheses): Items 2023 2024 Abbey Company: Sales $ (692,000) $ (1,098,000) Operating expenses 444,000 672,000 Intra-entity gross profits in ending inventory (included in above figures) (167,000) (186,000) Dividend income—Benjamin Company (9,000) (40,500) Benjamin Company: Sales (269,000) (351,000) Operating expenses 129,000 170,000 Dividends paid (10,000) (45,000) Assume that a tax rate of 21 percent is applicable to both companies. Required: On consolidated financial statements for 2024, 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 2024, what are the income tax expense and income tax currently payable if they choose…
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 $ (860,000 ) $ (964,000 ) Operating expenses 572,000 636,000 Intra-entity gross profits in ending inventory (included in above figures) (193,000 ) (226,000 ) Dividend income—Benjamin Company (13,500 ) (31,500 ) Benjamin Company: Sales (263,000 ) (325,000 ) Operating expenses 158,000 164,000 Dividends paid (15,000 ) (35,000 ) 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…
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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: $ (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?
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 $ (784,000 ) $ (890,000 ) Operating expenses 540,000 546,000 Intra-entity gross profits in ending inventory (included in above figures) (122,000 ) (235,000 ) Dividend income—Benjamin Company (9,000 ) (40,500 ) Benjamin Company: Sales (275,000 ) (284,000 ) Operating expenses 156,000 182,000 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…
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…
Comparative income statements of Sub Corporation for the calendar years 2019, 2020, and 2021 are as follows (in thousands): 2019 2020 2021Sales $22,000 $18,500 $19,250Cost of sales 10,600 9,900 10,100Gross profit 11400 8600 9150Operating expenses 5,700 5,500 6,000Net income $ 5700 $ 3100 $ 3150ADDITIONAL INFORMATION1. Sub was an 80 percent-owned subsidiary of Pub Corporation throughout the 2019–2021 period. Pub’s…
Comparative income statements of Sub Corporation for the calendar years 2019, 2020, and 2021 are as follows (in thousands): 2019 2020 2021Sales $22,000 $18,500 $19,250Cost of sales 10,600 9,900 10,100Gross profit 11400 8600 9150Operating expenses 5,700 5,500 6,000Net income $ 5700 $ 3100 $ 3150ADDITIONAL INFORMATION1. Sub was an 80 percent-owned subsidiary of Pub Corporation throughout the 2019–2021 period. Pub’s separate income (excludes income from Sub) was $7,200,000, $6,600,000, and $7,500,000 in 2019, 2020, and 2021, respectively. Pub acquired its interest in Sub at its underlying book value, which was equal to fair value on July 1, 2017.2. Pub sold inventory items to Sub during 2019 at a gross profit to Pub of $720,000. Half the merchandise remained in Sub’s inventory at December 31, 2019. Total sales by Pub to Sub in 2019 were $1,800,000. The remaining merchandise was sold by Sub in 2020.3. Pub’s inventory at December 31, 2020, included items acquired from Sub on which Sub made…
Comparative income statements of Sub Corporation for the calendar years 2019, 2020, and 2021 are as follows (in thousands): 2019 2020 2021Sales $22,000 $18,500 $19,250Cost of sales 10,600 9,900 10,100Gross profit 11400 8600 9150Operating expenses 5,700 5,500 6,000Net income $ 5700 $ 3100 $ 3150ADDITIONAL INFORMATION1. Sub was an 80 percent-owned subsidiary of Pub Corporation throughout the 2019–2021 period. Pub’s separate income (excludes income from Sub) was $7,200,000, $6,600,000, and $7,500,000 in 2019, 2020, and 2021, respectively. Pub acquired its interest in Sub at its underlying book value, which was equal to fair value on July 1, 2017.2. Pub sold inventory items to Sub during 2019 at a gross profit to Pub of $720,000. Half the merchandise remained in Sub’s inventory at December 31, 2019. Total sales by Pub to Sub in 2019 were $1,800,000. The remaining merchandise was sold by Sub in 2020.3. Pub’s inventory at December 31, 2020, included items acquired from Sub on…

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