Cardinal and Bluebird Corporations both use a calendar year as their tax year. At the close of business on June 30, Cardinal Corporation buys all of Bluebird Corporation's stock. If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year, what portion of Bluebird's income will be included in the consolidated return? (Assume all months have 30 days.)
A)100%
B)50%
C)0%
D)none of the above

Question

Quizplus · Accepted Answer

Since Cardinal Corporation bought Bluebird Corporation's stock at the end of June, Bluebird Corporation earned income for the first six months of the year. Therefore, 50% of Bluebird Corporation's income will be included in the consolidated return.

Cardinal and Bluebird Corporations Both Use a Calendar Year as Their