On January 1,20X8,Putter Corporation Acquired 40 Percent of the Voting

question 9

Multiple Choice

On January 1,20X8,Putter Corporation acquired 40 percent of the voting shares of Shank Company for $65,000.Shank reported net income of $45,000 and paid dividends of $10,000 in 20X8.Putter reported operating income of $50,000 for the year.There is 80 percent exemption of intercompany dividends and the effective tax rate is 35 percent.Assume that the equity method is being used.
-For a subsidiary to be eligible to be included in a consolidated tax return,at least ________ of its stock must be held by the parent company or another company included in the consolidated return.

• A)50 percent
• B)40 percent
• C)75 percent
• D)80 percent

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Definitions:

Loss

The negative result when expenses exceed revenues during a specific period.

Sale

The exchange of goods or services for money or other compensation, forming the primary revenue-generating activity of a business.

Journal Entry

A record in accounting that logs every financial transaction a business makes, showing which accounts are affected and by how much.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was put into use.