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)$107,000.
B)$108,000.
C)$108,900.
D)$115,800.
E)$121,000.

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)$107,000. 
B)$108,000. 
C)$108,900. 
D)$115,800. 
E)$121,000.

Quizplus · Accepted Answer

ParentCo's taxable income = $100,000 - $7,000 = $93,000
SubCo's taxable income = $25,000 + $1,800 - $2,000 - $500 = $24,300

Consolidated taxable income = $93,000 + $24,300 + $1,600 = $118,900

But, there was intercompany dividends received from SubCo to ParentCo of $10,000, which are eliminated in consolidation.

Therefore, consolidated taxable income = $118,900 - $10,000 = $108,900.

Hence, the correct answer is option C.

ParentCo and SubCo Had the Following Items of Income and Deduction