Parent Corporation Owns All of the Stock of Richards and Smith

question 73

Multiple Choice

Parent Corporation owns all of the stock of Richards and Smith Corporations on January 1. The three corporations have filed consolidated tax returns for a number of calendar years. Parent sells all of the stock of Richards Corporation on June 1. Parent purchases all of the stock of Taylor Corporation on September 1. Parent sells all of the stock of Smith Corporation on November 1. When does the affiliated group terminate?

• A)June 1
• B)September 1
• C)November 1
• D)The original affiliated group does not terminate.

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Definitions:

360-Day Year

A simplified accounting method where the year is assumed to have only 360 days for the purpose of interest calculations.

Exact Interest

Interest calculation method based on a 365-day year or actual number of days in a loan period.

365-Day Year

A method of computing interest where the basis for the calculation is a full 365-day year, used to give a more precise daily rate.

360-Day Year

An accounting practice assuming twelve 30-day months, used for simplicity in calculations and financial models.