Cardinal and Bluebird Corporations Both Use a Calendar Year as Their

question 5

Multiple Choice

Cardinal and Bluebird Corporations both use a calendar year as their tax year. At the close of business on June 30, Cardinal Corporation buys all of Bluebird Corporation's stock. If the two corporations file a consolidated return and both corporations earn their income evenly throughout the year, what portion of Cardinal's income will be included in the consolidated return? (Assume all months have 30 days.)

• A)100%
• B)50%
• C)0%
• D)none of the above

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Definitions:

Exchange Rate

The price of one currency in terms of another currency.

Accounts Receivable-Kagome

An account representing money owed to Kagome (presumably a company) by its customers for goods or services that have been delivered but not yet paid for.

Equity Method Investments-Ferris

A specific example or case of using the equity method for accounting for investments in which an investor has significant influence over the investee, but does not control it.

Cash Dividends

Payments made by a company to its shareholders out of its profits in the form of cash.