Reference no: EM131915441

Questions -

Q1.The Brandon Company, a manufacturer, and the Schimmel Company, a retailer, entered into a business combination whereby Brandon Company acquired for cash all of the outstanding voting common stock of Schimmel Corporation. The Brandon Company is preparing consolidated financial statements immediately after the consummation of the newly formed business combination.

1) How should the Brandon Company determine the amounts reported as assets and liabilities of the Schimmel Company?

2) Assuming the transaction resulted in goodwill, how will the amount of goodwill be determined?

3) Under what situation should Schimmel Company be included in the entity's consolidated financial statement?

Q2. Sagehen Enterprises reports pretax financial income of $80,000 for 2012. The following cause taxable income to be different from pretax financial income:

A. Depreciation on the tax return is greater than depreciation on the income statement by $15,000.

B. Rent collected on the tax return is $25,000 greater than rent earned on the income statement.

C. Fines reported on the income statement were $10,000.

The current tax rate is 30%. There are no deferred taxes at the beginning of 2012.

1) Compute taxable income and income tax payable for 2012.

2) Which of the differences are temporary, and which are permanent?