White Company owns 60% of Cody Company. Separate tax returns are required. For 2012, White's operating income (excluding taxes and any income from Cody) was $300,000 while Cody reported a pretax income of $125,000. During the period, Cody paid a total of $25,000 in cash dividends; $15,000 (60%) to White and $10,000 to the non-controlling interest. White paid dividends of $180,000. The income tax rate for both companies is 30%.
Compute Cody's undistributed earnings for 2013.

Question

Quizplus · Accepted Answer

Sub's Operating Income $125,000 - Tax Liability $37,500 - Dividend Payments $25,000 = Undistributed Earnings $62,500

White Company Owns 60% of Cody Company