Palmquist Corporation and Its 80%-Owned Subsidiary,Sadler Corporation,are Members of an Affiliated

question 38

Multiple Choice

Palmquist Corporation and its 80%-owned subsidiary,Sadler Corporation,are members of an affiliated group.They do not file consolidated tax returns.Sadler had $3,000,000 of income and paid $1,000,000 dividends in 2014.Palmquist and Sadler had 35% income tax rates.What amount of Sadler's dividends is taxable to Palmquist in 2014?

• A)$0
• B)$70,000
• C)$160,000
• D)$200,000

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Definitions:

GAAP

A set of widely adhered to accounting norms and guidelines for the preparation of financial statements.

Annual Depreciation Expense

The portion of the cost of a fixed asset that is expensed each year over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Double Declining-Balance Depreciation

An accelerated depreciation method that double the rate of straight-line depreciation, decreasing the value of assets more quickly.

Accumulated Depreciation Balance

The total amount of depreciation that has been recorded against a fixed asset up to a specific point in time, reflecting the decline in the asset's value.