Macaw Owned 100% of Flamingo for the Entire Year

question 9

Multiple Choice

Macaw owned 100% of Flamingo for the entire year.Macaw uses the accrual method of tax accounting, whereas Flamingo uses the cash method.During the year, Flamingo sold raw materials to Macaw for $10,000 under a contract that requires no payment to Flamingo until the following year. Exclusive of this transaction, Macaw had income for the year of $90,000, and Flamingo had income of $40,000.The group's consolidated taxable income for the year is:

• A)$120,000.
• B)$130,000.
• C)$140,000.
• D)Some other amount.
• E)Cannot be determined.

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Definitions:

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