Pretax operating incomes of Pang Corporation and its 70%-owned subsidiary,Sala Corporation,for the year 2014,are shown below.Sala pays total dividends of $60,000 for the year.There are no unamortized book value/fair value differentials relating to Pang's investment in Sala.During the year,Pang sold land to Sala for a gain of $35,000 and Sala holds this land at the end of the year.The marginal corporate tax rate for both corporations is 34%.
$\begin{array}{lcc}
&\underline{\text { Pang }} & \underline{\text { Sala }}\
\text { Sales revenue } & \$ 900,000 & \$ 600,000 \
\text { Gain on sale of land } & 35,000 & \
\text { Cost of sales } & (480,000) & (325,000) \
\text { Other expenses } & (192,000) & (78,000) \
\text { Pretax operating income (does not include investment income) } & \$ 263,000 & \$ 197,000
\end{array}$ Required:
1.Determine the separate amounts of income tax expense for Pang and Sala as if they had filed separate tax returns.
2.Determine Pang's net income from Sala.

Question

Pretax operating incomes of Pang Corporation and its 70%-owned subsidiary,Sala Corporation,for the year 2014,are shown below.Sala pays total dividends of $60,000 for the year.There are no unamortized book value/fair value differentials relating to Pang's investment in Sala.During the year,Pang sold land to Sala for a gain of $35,000 and Sala holds this land at the end of the year.The marginal corporate tax rate for both corporations is 34%.
 $\begin{array}{lcc}
&\underline{\text { Pang }} & \underline{\text { Sala }}\
\text { Sales revenue } & \$ 900,000 & \$ 600,000 \
\text { Gain on sale of land } & 35,000 & \
\text { Cost of sales } & (480,000) & (325,000) \
\text { Other expenses } & (192,000) & (78,000) \
\text { Pretax operating income (does not include investment income) } & \$ 263,000 & \$ 197,000
\end{array}$  Required:
1.Determine the separate amounts of income tax expense for Pang and Sala as if they had filed separate tax returns.
2.Determine Pang's net income from Sala.

Quizplus · Accepted Answer

The Answer of Pretax operating incomes of Pang Corporation and its 70%-owned subsidiary,Sala Corporation,for the year 2014,are shown below.Sala pays total dividends of $60,000 for the year.There are no unamortized book value/fair value differentials relating to Pang's investment in Sala.During the year,Pang sold land to Sala for a gain of $35,000 and Sala holds this land at the end of the year.The marginal corporate tax rate for both corporations is 34%.
 $\begin{array}{lcc}
&\underline{\text { Pang }} & \underline{\text { Sala }}\
\text { Sales revenue } & \$ 900,000 & \$ 600,000 \
\text { Gain on sale of land } & 35,000 & \
\text { Cost of sales } & (480,000) & (325,000) \
\text { Other expenses } & (192,000) & (78,000) \
\text { Pretax operating income (does not include investment income) } & \$ 263,000 & \$ 197,000
\end{array}$  Required:
1.Determine the separate amounts of income tax expense for Pang and Sala as if they had filed separate tax returns.
2.Determine Pang's net income from Sala.

Pretax Operating Incomes of Pang Corporation and Its 70%-Owned Subsidiary,Sala