On January 1, 2010, Piranto acquires 90 percent of Slinton’s outstanding shares. Financial information for these two companies for the years of 2010 and 2011 follows:
|
2010 |
2011 |
|
|
Piranto Company: |
||
|
Sales |
$(600,000) |
($800,000) |
|
Operational expenses |
400,000 |
500,000 |
|
Unrealized gains as of end of year |
||
|
(included in above figures) |
120,000 |
150,000 |
|
Dividend income—Slinton Company Slinton Company: |
18,000 |
36,000 |
|
Sales |
200,000 |
250,000 |
|
Operational expenses |
120,000 |
150,000 |
|
Dividends paid |
20,000 |
40,000 |
Assume that a tax rate of 40 percent is applicable to both companies.
a. On consolidated financial statements for 2011, what are the income tax expense and the income tax currently payable if Piranto and Slinton file a consolidated tax return as an affiliated group?
b. On consolidated financial statements for 2011, what are the income tax expense and income tax currently payable for each company if they choose to file separate returns?