On January 1, 2017,Abbey acquires 90 percent of Benjamin's outstanding shares.Financial information for these two companies for the years of 2017and 2018 follows:
Abbey Company:
2017 2018
Sales | $ (776,000) | $ (1,114,000) |
Operating expenses | 488,000 | 674,000 |
Intra-entity gross profits in endinginventory (included in | | |
above figures) | (137,000) | (164,000) |
Dividend income—Benjamin Company | (18,000) | (36,000) |
Benjamin Company:
Sales | (207,000) | (330,000) |
Operating expenses | 121,000 | 191,000 |
Dividends paid | (20,000) | (40,000) |
Assume that a taxrate of 40 percent is applicable to both companies :
- On consolidated financial statements for 2018, what are theincome tax expense and the income tax currently payable if Abbeyand Benjamin file a consolidated tax return as an affiliatedgroup?
- On consolidated financial statements for 2018, what are theincome tax expense and income tax currently payable if they chooseto file separate returns?
a. Income tax expense
Income tax payable
b. Income tax expense
Income tax payable
