80.2K

Verified Solution

Link Copied!

Lake acquired a controlling interest in Boxwood several years ago. During the current fiscal period, the two companies individually reported the following income $($exclusive of any investment income$)$:

Lake $ $303,000$

Boxwood $100,000$

Lake paid a $$60,000$ cash dividend during the current year, and Boxwood distributed $$14,000.$

Boxwood sells inventory to Lake each period. Intra$-$entity gross profits of $$27,000$ were present in Lake's beginning inventory for the current year, and its ending inventory carried $$39,000$ in intra$-$entity gross profits.

View each of the following questions as an independent situation. The effective tax rate for both companies is $21$ percent.

If Lake owns a $60$ percent interest in Boxwood, what total income tax expense must be reported on a consolidated income statement for this period? $($Round the intermediate calculations and final answers to the nearest dollar amount.$)$

If Lake owns a $60$ percent interest in Boxwood, what total amount of income taxes must be paid by these two companies for the current year? $($Round the intermediate calculations and final answers to the nearest dollar amount.$)$

If Lake owns a $90$ percent interest in Boxwood and a consolidated tax return is filed, what amount of income tax expense would be reported on a consolidated income statement for the year?

Answer & Explanation Solved by verified expert

See Answer