ParentCo Owned 100% of SubCo for the Entire Year, and Both

question 144

Multiple Choice

ParentCo owned 100% of SubCo for the entire year, and both companies use the accrual method of tax accounting. During the year, SubCo purchased $20,000 of supplies from ParentCo. In addition, SubCo provided internal audit services to ParentCo, which were worth $40,000. Including these transactions, ParentCo's separate taxable income was $75,000, and SubCo's separate taxable income was $100,000. What is the group's consolidated taxable income for the year?

• A) $215,000
• B) $195,000
• C) $175,000
• D) $155,000

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Definitions:

Narcotic Pain Medication

Drugs derived from opium or synthetic opiates used to treat moderate to severe pain by altering the brain’s perception of pain.

Barium Enema

A diagnostic test where barium sulfate is used to fill and coat the inside of the colon and rectum for clear X-ray images.

Bedpan

A receptacle used by bedridden patients for the collection of urine and feces when they are unable to use the bathroom.

Digital Removal

A medical procedure involving the manual extraction of feces from the rectum, often used in cases of severe constipation.