ParentCo and SubCo had the following items of income and deduction for the current year. Compute ParentCo and SubCo's consolidated taxable income or loss.
A) $91,000.
B) $100,800.
C) $112,000.
D) $122,000.

Question

ParentCo and SubCo had the following items of income and deduction for the current year.  Compute ParentCo and SubCo's consolidated taxable income or loss.
A) $91,000. 
B) $100,800. 
C) $112,000. 
D) $122,000.

Quizplus · Accepted Answer

ParentCo's taxable income: 
$160,000 gross income 
- $20,000 charitable contributions 
- $24,000 depreciation 
= $116,000 taxable income

SubCo's taxable income: 
$70,000 gross income 
- $10,000 business expenses 
- $6,000 depreciation 
= $54,000 taxable income

Consolidated taxable income: 
ParentCo's taxable income + SubCo's taxable income 
= $116,000 + $54,000 
= $170,000

However, there is a deduction for intercompany dividends received of $69,200. 
$170,000 consolidated taxable income 
- $69,200 intercompany dividends received 
= $100,800 consolidated taxable income.

ParentCo and SubCo Had the Following Items of Income and Deduction