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 $ (785,000) $ (1,042,000) Operating expenses 536,000 662,000 . Intra-entity gross profits in ending inventory (included in above figures) (148,000) (168,000) Dividend income-Benjamin Company (22,500) (27,000) Benjamin Company: Sales (330,000) (335,000) Operating expenses 167,000 206,000 Dividends paid (25,000) (30,000) 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 $ (785,000) $ (1,042,000) Operating expenses 536,000 662,000 . Intra-entity gross profits in ending inventory (included in above figures) (148,000) (168,000) Dividend income-Benjamin Company (22,500) (27,000) Benjamin Company: Sales (330,000) (335,000) Operating expenses 167,000 206,000 Dividends paid (25,000) (30,000) 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?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

See similar textbooks

Similar questions

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. $_____________
Net Income and Comprehensive Income At the beginning of 2019, JR Companys shareholders equity was as follows: During 2019, the following events and transactions occurred: 1. JR recognized sales revenues of 108,000. It incurred cost of goods sold of 62,000 and operating expenses of 12,000, 2. JR issued 1,000 shares of its 5 par common stock for 14 per share. 3. JR invested 30,000 in available-for-sale securities. At the end of the year, the securities had a fair value of 35,000. 4. JR paid dividends of 6,000. The income tax rate on all items of income is 30%. Required: 1. Prepare a 2019 income statement for JR which includes net income and comprehensive income ignore earnings per share). 2. For 2016 prepare a separate (a) income statement (ignore earnings per share) and (b) statement of comprehensive income.
Income Statement, Lower Portion Cunningham Company reports a retained earnings balance of 365,200 at the beginning of 2019. For the year ended December 31, 2019, the company reports pretax income from continuing operations of 150,500. The following information is also available pertaining to 2019: 1. The company declared and paid a 0.72 cash dividend per share on the 30,000 shares of common stock that were outstanding the entire year. 2. The company incurred a pretax 21,000 loss as a result of an earthquake, which is not unusual for the area. This is included in the 150,500 income from continuing operations. 3. The company sold Division P (a component of the company) in May. From January through May, Division P had incurred a pretax loss from operations of 33,000. A pretax gain of 15,000 was recognized on the sale of Division P. Required: Assuming that all the pretax items are subject to a 30% income tax rate: 1. Complete the lower portion of Cunningham's 2019 income statement beginning with Pretax Income from Continuing Operations. Include any related note to the financial statements. 2. Prepare an accompanying retained earnings statement.
Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1, 000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50, 000 to retire bonds with a face value (and book value) of 50, 000. e. On July 2, 2019, Farrell purchased equipment for 63, 000 cash. f. On December 31, 2019, land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows. (Appendix 21.1) Spreadsheet and Statement Refer to the information for Farrell Corporation in P21-13. Required: 1. Using the direct method for operating cash flows, prepare a spreadsheet to support a 2019 statement of cash flows. (Hint: Combine the income statement and December 31, 2019, balance sheet items for the adjusted trial balance. Use a retained earnings balance of 291,000 in this adjusted trial balance.) 2. Prepare the statement of cash flows. (A separate schedule reconciling net income to cash provided by operating activities is not necessary.)
Comprehensive The following are Farrell Corporations balance sheets as of December 31, 2019, and 2018, and the statement of income and retained earnings for the year ended December 31, 2019: Additional information: a. On January 2, 2019, Farrell sold equipment costing 45,000, with a book value of 24,000, for 19,000 cash. b. On April 2, 2019, Farrell issued 1,000 shares of common stock for 23,000 cash. c. On May 14, 2019, Farrell sold all of its treasury stock for 25,000 cash. d. On June 1, 2019, Farrell paid 50,000 to retire bonds with a face value (and book value) of 50,000. e. On July 2, 2019, Farrell purchased equipment for 63,000 cash. f. On December 31, 2019. land with a fair market value of 150,000 was purchased through the issuance of a long-term note in the amount of 150,000. The note bears interest at the rate of 15% and is due on December 31, 2021. g. Deferred taxes payable represent temporary differences relating to the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial statement reporting. Required: 1. Prepare a spreadsheet to support a statement of cash flows for Farrell for the year ended December 31, 2019, based on the preceding information. 2. Prepare the statement of cash flows.
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 $ (683,000) $(1,062,000) 446,000 Operating expenses Intra-entity gross profits in ending inventory (included in above figures) Dividend income-Benjamin Company Benjamin Company: Sales 594,000 (169,000) (9,000) (237,000) (40,500) Operating expenses Dividends paid (293,000) 124,000 (10,000) (359,000) 194,000 (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? Amount а. Income tax…
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…
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…
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): 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 a. b. 2020 Assume that a tax rate of 21 percent is applicable to both companies. $ (683,000) 446,000 Income tax expense Income tax payable Income tax expense Income tax payable (169,000) (9,000) Amount (293,000) 124,000 (10,000) 2021 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? $(1,062,000) 594,000 b. On consolidated financial statements for 2021, what are the income tax expense and income tax currently payable if they choose to file…
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…