ParentCo Owned 100% of SubCo for the Entire Year

question 125

Multiple Choice

ParentCo owned 100% of SubCo for the entire year. ParentCo uses the accrual method of tax accounting whereas SubCo uses the cash method. During the year, SubCo sold raw materials to ParentCo for $35,000 under a contract that requires no payment to SubCo until the following year. Exclusive of this transaction, ParentCo had income for the year of $30,000, and SubCo had income of $50,000. The group's consolidated taxable income for the year was:

• A) $165,000.
• B) $150,000.
• C) $115,000.
• D) $80,000.

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