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:

Mineral Extraction

The process of removing valuable minerals or other geological materials from the Earth, typically from an ore body, lode, vein, seam, or reef.

Book Value

The net value of a company's assets minus its liabilities, often used to estimate a company's worth.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold in a company.