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 Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales Operating expenses Dividends paid $ (790,000) $ (1,010,000) 508,000 632,000 (149,000) (159,000) (18,000) (36,000) (327,000) (352,000) 205,000 221,000 (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 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? a. Income tax expense a. Income tax payable b. Income tax expense b. Income tax payable 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 Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales Operating expenses Dividends paid $ (790,000) $ (1,010,000) 508,000 632,000 (149,000) (159,000) (18,000) (36,000) (327,000) (352,000) 205,000 221,000 (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 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? a. Income tax expense a. Income tax payable b. Income tax expense b. Income tax payable Amount
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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Transcribed Image Text: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
Operating expenses
Intra-entity gross profits in ending inventory
(included in above figures)
Dividend income-Benjamin Company
Benjamin Company:
Sales
Operating expenses
Dividends paid
$ (790,000) $ (1,010,000)
508,000
632,000
(149,000)
(159,000)
(18,000)
(36,000)
(327,000)
(352,000)
205,000
221,000
(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 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?
a. Income tax expense
a. Income tax payable
b. Income tax expense
b. Income tax payable
Amount
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