Patton's operating income excludes income from the investment in Stevens, but includes $150,000 of unrealized gains on intra-entity transfers of inventory. Patton uses the initial value method to account for the investment in Stevens.
-Assume Patton owns 90 percent of the voting stock of Stevens and files a consolidated income tax return. What amount of income taxes would be paid? $$\begin{array} { | l | c | c | }
\hline \text { Operating Income } & \$ 2,250,000 & { [ \$ 2,000,000 + \$ 400,000 - \$ 150,000 ] } \
\hline \text { Tax rate } & 30 \% & \
\hline \text { Taxes to be paid } & \$ 675,000 & \
\hline
\end{array}$$

Question

Patton's operating income excludes income from the investment in Stevens, but includes $150,000 of unrealized gains on intra-entity transfers of inventory. Patton uses the initial value method to account for the investment in Stevens.
-Assume Patton owns 90 percent of the voting stock of Stevens and files a consolidated income tax return. What amount of income taxes would be paid? $$\begin{array} { | l | c | c | } 
\hline \text { Operating Income } & \$ 2,250,000 & { [ \$ 2,000,000 + \$ 400,000 - \$ 150,000 ] } \
\hline \text { Tax rate } & 30 \% & \
\hline \text { Taxes to be paid } & \$ 675,000 & \
\hline
\end{array}$$

Quizplus · Accepted Answer

The Answer of Patton's operating income excludes income from the investment in Stevens, but includes $150,000 of unrealized gains on intra-entity transfers of inventory. Patton uses the initial value method to account for the investment in Stevens.
-Assume Patton owns 90 percent of the voting stock of Stevens and files a consolidated income tax return. What amount of income taxes would be paid? $$\begin{array} { | l | c | c | } 
\hline \text { Operating Income } & \$ 2,250,000 & { [ \$ 2,000,000 + \$ 400,000 - \$ 150,000 ] } \
\hline \text { Tax rate } & 30 \% & \
\hline \text { Taxes to be paid } & \$ 675,000 & \
\hline
\end{array}$$

Patton's Operating Income Excludes Income from the Investment in Stevens