JDog Corporation owns stock in Oscar Inc. valued at $2,000,000 at the beginning of the year and $2,200,000 at year-end. Jdog received a $10,000 dividend from Oscar Inc. What temporary book-tax differences associated with its ownership in Oscar stock will Jdog report for the year in the following alternative scenarios (income difference only-ignore the dividends-received deduction)?
a. JDog owns 5 percent of the Oscar Inc. stock. Oscar's income for the year was $500,000.
b. JDog owns 40 percent of the Oscar Inc. stock. Oscar's income for the year was $500,000.

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27-04-2021
Business

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JDog Corporation owns stock in Oscar Inc. valued at $2,000,000 at the beginning of the year and $2,200,000 at year-end. Jdog received a $10,000 dividend from Oscar Inc. What temporary book-tax differences associated with its ownership in Oscar stock will Jdog report for the year in the following alternative scenarios (income difference only-ignore the dividends-received deduction)?
a. JDog owns 5 percent of the Oscar Inc. stock. Oscar's income for the year was $500,000.
b. JDog owns 40 percent of the Oscar Inc. stock. Oscar's income for the year was $500,000.

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amcool amcool · Answer 1 · 2021-04-30T03:38:52+02:00

Answer:

a. The temporary book-tax differences associated with 5 percent ownership in Oscar stock which Jdog will report for the year is $0.

b. The temporary book-tax differences associated with 40 percent ownership in Oscar stock which Jdog will report for the year is $190,000.

Explanation:

a. JDog owns 5 percent of the Oscar Inc. stock. Oscar's income for the year was $500,000

The 5 percent ownership implies that JDog has to report $10,000 in book income, and also report $10,000 in gross income. Therefore, we have:

Temporary book difference = Amount to report in book income – Amount to report in gross income = $10,000 - $10,000 = $0

Therefore, the temporary book-tax differences associated with 5 percent ownership in Oscar stock which Jdog will report for the year is $0.

b. JDog owns 40 percent of the Oscar Inc. stock. Oscar's income for the year was $500,000.

The 40 percent ownership implies that:

Amount to report in book income = $40% * $500,000 = $200,000

Amount to report in gross income = $10,000

Temporary book difference = Amount to report in book income – Amount to report in gross income = $200,000 - $10,000 = $190,000

Therefore, the temporary book-tax differences associated with 40 percent ownership in Oscar stock which Jdog will report for the year is $190,000.