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Question: Garrison holds a controlling interest in Robertson’

Garrison holds a controlling interest in Robertson’s outstanding stock. For the current year, the following information has been gathered about these two companies:
Garrison holds a controlling interest in Robertson’s outstanding stock. For the current year, the following information has been gathered about these two companies:
Garrison uses the initial value method to account for the investment in Robertson. Garrison’s separate operating income figure does not include dividend income for the current year.
a. Assume that Garrison owns 80 percent of Robertson’s voting stock. On a consolidated tax return, what amount of income tax is paid?
b. Assume that Garrison owns 80 percent of Robertson’s voting stock. On separate tax returns, what total amount of income tax is paid?
c. Assume that Garrison owns 70 percent of Robertson’s voting stock. What total amount of income tax expense does a consolidated income statement recognize?
d. Assume that Garrison holds 60 percent of Robertson’s voting stock. On a separate income tax return, what amount of income tax does Garrison have to pay?

Garrison uses the initial value method to account for the investment in Robertson. Garrison’s separate operating income figure does not include dividend income for the current year. a. Assume that Garrison owns 80 percent of Robertson’s voting stock. On a consolidated tax return, what amount of income tax is paid? b. Assume that Garrison owns 80 percent of Robertson’s voting stock. On separate tax returns, what total amount of income tax is paid? c. Assume that Garrison owns 70 percent of Robertson’s voting stock. What total amount of income tax expense does a consolidated income statement recognize? d. Assume that Garrison holds 60 percent of Robertson’s voting stock. On a separate income tax return, what amount of income tax does Garrison have to pay?


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> What is the net impact on Munchkin’s net income for the quarter ended June 30, 2020, as a result of this forward contract hedge of a firm commitment? a. $–0– b. $2,400 increase in net income c. $4,000 decrease in net income d. $8,000 increase in net inco

> What was the net impact on Stone Company’s 2021 income as a result of this fair value hedge of a firm commitment and export sale? a. $–0–. b. $1,300 decrease in income c. $78,000 increase in income d. $78,700 increase in income

> What was the net impact on Stone Company’s 2020 income as a result of this fair value hedge of a firm commitment? a. $–0– b. $700 decrease in income c. $300 increase in income d. $700 increase in income

> Shandra Corporation (a U.S.-based company) expects to order goods from a foreign supplier at a price of 100,000 pounds, with delivery and payment to be made on April 20. On February 20, when the spot rate is $1.00 per pound, Shandra purchases a two-month

> On March 1, Derby Corporation (a U.S.-based company) expects to order merchandise from a sup- plier in Norway in three months. On March 1, when the spot rate is $0.10 per Norwegian krone, Derby enters into a forward contract to purchase 500,000 Norwegian

> Assuming that Brandt entered into a forward contract to sell 10 million South Korean won on December 1, 2020, as a fair value hedge of a foreign currency receivable, what is the net impact on its net income in 2020 resulting from a fluctuation in the val

> Assuming that Brandt did not hedge its foreign exchange risk, how much foreign exchange gain or loss should it report on its 2020 income statement with regard to this transaction? a. $5,000 gain b. $3,000 gain c. $2,000 loss d. $1,000 loss

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> Boulder, Inc., obtained 90 percent of Rock Corporation on January 1, 2019. Annual amortization of $22,000 is applicable on the allocations of Rock’s acquisition-date business fair value. On January 1, 2020, Rock acquired 75 percent of S

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> On January 1, 2019, Aspen Company acquired 80 percent of Birch Company’s voting stock for $288,000. Birch reported a $300,000 book value, and the fair value of the noncontrolling interest was $72,000 on that date. Then, on January 1, 20

> Lanister Company purchases all of Mountain Company for $401,600 in cash. On that date, the subsidiary has net assets with a $355,000 fair value but a $315,000 book value and tax basis. The tax rate is 21 percent. Neither company has reported any deferred

> What would be the answer to Problem 11 if a consolidated tax return were filed? a. –0– b. $1,785 c. $2,100 d. $8,925

> Paloma, Inc., owns 85 percent of Blanca Corporation. Both companies have been profitable for many years. During the current year, the parent sold merchandise to the subsidiary at a transfer price of $175,000. In recording the transfer, the parent recogni

> Kyle, Inc., owns 75 percent of CRT Company. During the current year, CRT reported net income of $425,000 but paid a total cash dividend of only $105,000. What deferred income tax liability must be recognized in the consolidated balance sheet? Assume the

> Kelly Fernandez and Michael Webster have decided to create a business. They have financing available and have a well-developed business plan. However, they have not yet decided which type of legal business structure would be best for them. Required Write

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> On January 1, Paisley, Inc., paid $560,000 for all of Skyler Corporation’s outstanding stock. This cash payment was based on a price of $180 per share for Skyler’s $100 par value preferred stock and $38 per share for i

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> Bolero Company holds 80 percent of the common stock of Rivera, Inc., and 40 percent of this subsidiary’s convertible bonds. The following consolidated financial statements are for 2020 and 2021 (credit balances indicated by parentheses)

> On January 1, 2020, Mona, Inc., acquired 80 percent of Lisa Company’s common stock as well as 60 percent of its preferred shares. Mona paid $65,000 in cash for the preferred stock, with a call value of 110 percent of the $50 per share p

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> Paulina, Incorporated, owns 90 percent of Southport Company. On January 1, 2021, Paulina acquires half of Southport’s $500,000 outstanding 13-year bonds. These bonds had been sold on the open market on January 1, 2018, at a 12 percent effective rate. The

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> Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2020: On January 1, 2020, Highlight acquired on the open market bonds for $108,000 originally issued by Kio

> Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. C

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> Paige Clothing Company (Paige) helped form Apparel Media LLC, a company that will conduct e-commerce sales for Paige through a dedicated internet site. Two outside investors contributed $50,000 in start-up capital to Apparel Media as the sole owners of t

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> Dunn Corporation owns 100 percent of Grey Corporation’s common stock. On January 2, 2020, Dunn sold to Grey $40,000 of machinery with a carrying amount of $30,000. Grey is depreciating the acquired machinery over a five-year remaining l

> Angela, Inc., holds a 90 percent interest in Corby Company. During 2020, Corby sold inventory costing $77,000 to Angela for $110,000. Of this inventory, $40,000 worth was not sold to outsiders until 2021. During 2021, Corby sold inventory costing $72,000

> Parkette, Inc., acquired a 60 percent interest in Skybox Company several years ago. During 2020, Skybox sold inventory costing $160,000 to Parkette for $200,000. A total of 18 percent of this inventory was not sold to outsiders until 2021. During 2021, S

> What is the total for consolidated cost of goods sold? a. $670,000 b. $690,000 c. $788,000 d. $790,000

> What is the total for consolidated inventory? a. $143,000 b. $173,000 c. $175,000 d. $183,000

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> Kelly Company acquired 75 percent of Helton Company’s outstanding voting shares on January 1, 2019, in exchange for $285,000 in cash. The subsidiary’s stockholders’ equity accounts totaled $326,000, a

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