Parent and Subsidiary Corporations Have Filed Calendar- Year Consolidated Tax

question 45

Multiple Choice

Parent and Subsidiary Corporations have filed calendar- year consolidated tax returns for several years. Parent Corporation uses the cash method of accounting while Subsidiary Corporation uses the accrual method of accounting. If Parent lends Subsidiary money,

• A) the interest expense is deductible when accrued.
• B) the interest income is reported when the interest expense is accrued by Subsidiary.
• C) the interest expense and interest income may be reported in different consolidated return years.
• D) the interest expense deduction is taken when Parent reports the interest income.

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