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)$81,000.
B)$88,000.
C)$90,000.
D)$90,500.

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)$81,000. 
B)$88,000. 
C)$90,000. 
D)$90,500.

Quizplus · Accepted Answer

To compute the consolidated taxable income, we need to add the taxable income of ParentCo and SubCo and then adjust for any intercompany transactions. 
ParentCo's taxable income = ($100,000 - $22,000) = $78,000
SubCo's taxable income = ($20,000 + $14,000 - $8,000) = $26,000
Consolidated taxable income = $78,000 + $26,000 + $2,000 (intercompany dividend exclusion) = $106,000 - $16,000 (intercompany rent deduction) = $90,000 
Therefore, the correct answer is C.

ParentCo and SubCo Had the Following Items of Income and Deduction