Consolidated Return Scenario: Company P Purchased an 80% Interest in Company

question 29

Multiple Choice

Consolidated Return Scenario: Company P purchased an 80% interest in Company S on January 1, 20X3, for $800,000. On the purchase date, Company S stockholders' equity was $800,000. Any excess of cost over book value was attributed to a patent with a 10-year remaining life. In 20X3, Company P reported internally generated net income before taxes of $150,000. Company S reported a net income before taxes of $70,000. The firms file a consolidated tax return at a 30% tax rate.
-Refer to the Consolidated Return scenario. The consolidated net income is

• A) $142,800
• B) $121,800
• C) $138,800
• D) $152,000

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Definitions:

Commuter Marriages

Marriages in which the spouses live apart in different geographical locations due to their work commitments, leading to periodic commuting.

Resent

To feel bitterness or indignation due to a perceived wrong or injustice.

Isolated

Describes a state of being separated from others, either physically, emotionally, or both, resulting in limited social interactions.

Commuter Marriages

Marital relationships where spouses live apart in different geographic locations for employment or other reasons, maintaining their marriage primarily through visits and communication technology.