Pear, Inc.owns 80 percent of Apple Corporation.During the current year, Apple reported operating income before tax of $400,000 and paid a dividend of $120,000.The income tax rate for each company is 40 percent and separate tax returns are prepared.What deferred income tax liability arising this year must be recognized in the consolidated balance sheet?

Question

Quizplus · Accepted Answer

Since separate tax returns are prepared, there is no deferred tax liability related to the dividends received by Pear, Inc. from Apple Corporation. The dividends are not subject to deferred tax accounting in this scenario.

Pear, IncOwns 80 Percent of Apple Corporation