Dotes, Inc. owns 40% of Abner Co. Dotes accounts for its investment using the equity method. Abner follows a policy of paying dividends equal to 30% of its income each year. During the current year, Abner reported net income of $216,000. Dotes has an effective income tax rate of 32%.
Required:
What journal entry would Dotes record at the end of the current year for income taxes relating to the investment in Abner? Assume the investment is to be held for an indefinite time and that all amounts are to be rounded to the nearest dollar.

Question

Quizplus · Accepted Answer

The Answer of Dotes, Inc. owns 40% of Abner Co. Dotes accounts for its investment using the equity method. Abner follows a policy of paying dividends equal to 30% of its income each year. During the current year, Abner reported net income of $216,000. Dotes has an effective income tax rate of 32%.
Required:
What journal entry would Dotes record at the end of the current year for income taxes relating to the investment in Abner? Assume the investment is to be held for an indefinite time and that all amounts are to be rounded to the nearest dollar.