On January 1, 2009, Piranto acquires 90 percent of Slinton's outstanding shares. Financial information for these two companies for the years of 2009 and 2010 follows:
Sales $(600,000) $(800,000)
Operational expenses 400,000 500,000
Unrealized gains as of
end of the year (120,000) (150,000)
Dividend income Slinton company (18,000) (36,000)
Sales (200,000) (250,000)
Operational expenses 120,000 150,000
Dividend paid (20,000) (40,000)
Assume that a tax rate of 40 percent is applicable to both companies.
a. On consolidated financial statements for 2010, 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 statement for 2010, what are the income tax expense and income tax currently payable for each company if they choose to file separate returns?