Solution-What is the amount of total profit after tax

What is the amount of total profit after tax

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Reference no: EM133007090

Question - A owns 80% of B. On the date of acquisition, the goodwill was $88,000. This acquisition took place in 2018. In January 1 2020 A sold equipment to B. The book value of this equipment was $100,000. The gain before tax, on this sale, was $50,000. This equipment is being depreciated over the next 15 years, no residual value.

The tax rate for both companies is 40%.

The fiscal year end for both companies is December 31.

In 2020, income before Taxes earned by Company A is $1,000,000; while income before taxes for company B is $350,000.

Required -

a. Assume instead, that this equipment was sold to B on November 1, 2020, by how much would you adjust the consolidated depreciation expense for 2020?

b. Considering the gain on the sale of the equipment, and the depreciation expense that needs to be adjusted for 2020, what is the amount of total profit after tax that would be unrealized in 2020?

c. By how much would you adjust the consolidated depreciation expense for 2020?

Reference no: EM133007090

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What is the amount of total profit after tax

Reference no: EM133007090

Reference no: EM133007090

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