Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Tracy and Jerome, equal shareholders in Macaw Corporation, receive $600,000 each in distributions on December 31 of the current
year. Macaw's current-year taxable income is $1,000,000 and it has no accumulated E & P. Last year, Macaw sold an appreciated asset
for $1,200,000 (basis of $400,000). Payment for one-half of the sale of the asset was made this year. How much of Tracy's distribution
will be taxed as a dividend?
Oa, $300,000-
Ob. so
Oc. $500,000
Od. $600,000
Berny Ltd owns 100 per cent of Cozy Ltd. On 1 July 2019 Berny Ltd sells an item of plant to Cozy Ltd for $3.6 million. This plant cost Berny $4.5 million and had accumulated depreciation of $1.8 million at the date of the sale. The remaining useful life of the plant is assessed as 12 years and the tax rate is 30 per cent.
Required:
a) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2020
b) Prepare the entries to eliminate the effects of the above intragroup transactions in the consolidation journal of Berny Ltd’s group at 30 June 2021
Tane., owns 25 percent of JPW Company and applies the equity method. During the current year, Jubilee buys inventory costing $75,800 and then sells it to JPW for $124,000. At the end of the year, JPW still holds only $24,200 of merchandise. What amount of gross profit must Jubilee defer in reporting this investment using the equity method?
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