On January 1, 20X8, Gulfstream Corporation Acquired 40 Percent of the Voting

question 53

Multiple Choice

On January 1, 20X8, Gulfstream Corporation acquired 40 percent of the voting shares of Hunter Company for $65,000. Hunter reported net income of $45,000 and paid dividends of $10,000 in 20X8. Gulfstream reported operating income of $50,000 for the year. There is 80 percent exemption of intercompany dividends and the effective tax rate is 35 percent. Assume that the equity method is being used.
-Based on the preceding information,what would Gulfstream report as income tax expense for the year?

• A) $17,500
• B) $18,760
• C) $23,800
• D) $22,540

---

Definitions:

Gross Domestic Product

The total monetary value of all goods and services produced by a country's economy over a specified period.

IBM Stock

Shares of ownership in the International Business Machines Corporation, a multinational technology and consulting company.

Garage Sale

A sale of used household or personal items held outdoors or in a garage, typically by the household residents to dispose of unwanted items.

Kentucky Fried Chicken

A global fast-food restaurant chain that specializes in fried chicken, founded by Colonel Harland Sanders in the United States.