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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 $ (670,000) $ (958,000) Operating expenses 418,000 568, 000 Intra- entity gross profits in ending inventory (included in above figures) (196, 000) (220,000) Dividend income-Benjamin Company (22,500) (27,000) Benjamin Company: Sales (251,000) (331,000) Operating expenses 160,000 171,000 Dividends paid (25, 000) (30,000) 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 to file separate returns?

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 $ (670,000) $ (958,000) Operating expenses 418,000 568, 000 Intra- entity gross profits in ending inventory (included in above figures) (196, 000) (220,000) Dividend income-Benjamin Company (22,500) (27,000) Benjamin Company: Sales (251,000) (331,000) Operating expenses 160,000 171,000 Dividends paid (25, 000) (30,000) 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 to file separate returns?

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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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 $ (670, 000) $ (958,000) Operating expenses 418, 000 568, 000 Intra - entity gross profits in ending inventory (included in above figures) (196, 000) (220,000) Dividend income-Benjamin Company (22,500) (27,000) Benjamin Company: Sales (251, 000) (331, 000) Operating expenses 160,000 171,000 Dividends paid (25, 000) (30,000) 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 to file separate returns?
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 $ (670, 000) $ (958,000) Operating expenses 418, 000 568, 000 Intra - entity gross profits in ending inventory (included in above figures) (196, 000) (220,000) Dividend income-Benjamin Company (22,500) (27,000) Benjamin Company: Sales (251, 000) (331, 000) Operating expenses 160,000 171,000 Dividends paid (25, 000) (30,000) 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 to file separate returns?
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