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What are the income tax expense and income tax

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Reference no: EM132468335

On January 1, 2017, Bosley acquires 90 percent of Farmer's outstanding shares. Financial information for these two companies for the years of 2017 and 2018 follows:

                                              2017                              2018

Bosley Company:

Sales                                  $(682,000)                      $(904,000)

Operating expenses                $410,000                        $532,000

Intra-entity gross profits in ending

inventory (included in above figures) $(151,000)           $(195,000)

Dividend income-Farmer Company $(18,000)              $(36,000)

Farmer Company:

Sales                                        $(241,000)           $(365,000)

Operating expenses                       $157,000             $185,000

Dividends paid                             $(20,000)            $(40,000)

  • The tax rate of 40 percent is applicable to both companies.

Question 1: On consolidated financial statements for 2018, what are the income tax expense and the income tax currently payable if Bosley and Farmer file a consolidated tax return as an affiliated group?

Question 2: On consolidated financial statements for 2018, what are the income tax expense and income tax currently payable if they choose to file separate returns?

Reference no: EM132468335

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