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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Definitions:

Collective Bargaining

The process by which workers, through their unions, negotiate contracts with their employers to determine their terms of employment.

Unions

Organizations formed by workers to represent their interests, typically in negotiations with employers over wages, benefits, and working conditions.

Management

The act of coordinating the efforts of people to accomplish desired goals and objectives using available resources efficiently and effectively.

Level of Success

A measure or assessment of the extent to which an individual, group, or organization has achieved its goals or objectives.