FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Martin has a controlling interest in Rowen's outstanding stock. At the current year-end, the following information has been accumulated for these two companies:
| Separate Operating Income | Dividends Paid | |
| Martin | $540,000 | $90,000 |
| (includes a $189,000 net gross profit in intra-entity ending inventory) | ||
| Rowen | 380,000 | 80,000 |
Martin uses the initial value method to account for the investment in Rowen. The separate operating income figures just presented include neither dividend nor other investment income. The effective tax rate for both companies is 21 percent.
-
Assume that Martin owns 100 percent of Rowen's voting stock and is filing a consolidated tax return. What income tax amount does this affiliated group pay for the current period?
-
Assume that Martin owns 92 percent of Rowen's voting stock and is filing a consolidated tax return. What amount of income taxes does this affiliated group pay for the current period?
-
Assume that Martin owns 65 percent of Rowen's voting stock, but the companies elect to file separate tax returns. What is the total amount of income taxes that these two companies pay for the current period?
-
Assume that Martin owns 70 percent of Rowen's voting stock, requiring separate tax returns. What is the total amount of income tax expense to be recognized in the consolidated income statement for the current period? (Round your intermediate calculations and final answer to nearest whole dollar amount.)
-
Assume that Martin owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of income taxes does Martin have to pay for the current year?
Transcribed Image Text:Martin has a controlling Interest In Rowen's outstanding stock. At the current year-end, the following Informatlon has been
accumulated for these two companles:
Dividends Paid
Separate Operating Income
$540,000
(includes a $189,000 net gross profit in intra-entity ending
inventory)
380, e00
Martin
$9e, eee
Rowen
8e, 000
Martin uses the Initial value method to account for the Investment in Rowen. The separate operating income figures Just presented
Include nelther dividend nor other Investment Income. The effective tax rate for both companles is 21 percent.
a. Assume that Martin owns 100 percent of Rowen's voting stock and Is filng a consolidated tax return. What Income tax amount does
this affillated group pay for the current perlod?
b. Assume that Martin owns 92 percent of Rowen's voting stock and Is filig a consolidated tax return. What amount of Income taxes
does this affillated group pay for the current perlod?
c. Assume that Martın owns 65 percent of Rowen's voting stock, but the companles elect to file separate tax returns. What Is the total
amount of Income taxes that these two companles pay for the current period?
d. Assume that Martin owns 70 percent of Rowen's voting stock, requiring separate tax returns. What Is the total amount of Income tax
expense to be recognized in the consolidated Income statement for the current perlod? (Round your Intermediate calculations
and final answer to nearest whole dollar amount.)
e. Assume that Martin owns 70 percent of Rowen's voting stock so that separate tax returns are required. What amount of Income
taxes does Martin have to pay for the current year?
Answer is complete but not entirely correct.
Amount
a.
Income tax
174,300
b.
Income tax
174,300 X
C.
Total amount of income tax
193,200
d.
Total amount of income tax expense
193,200 X
e.
Income tax
348.600
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