Pretax Operating Incomes of Pang Corporation and Its 70%-Owned Subsidiary

question 31

Essay

Pretax operating incomes of Pang Corporation and its 70%-owned subsidiary, Sala Corporation, for the year 2011, are shown below.Sala pays total dividends of $60,000 for the year.There are no unamortized book value/fair value differentials relating to Pang's investment in Sala.During the year, Pang sold land to Sala for a gain of $35,000 and Sala holds this land at the end of the year.The marginal corporate tax rate for both corporations is 34%.
Required:
1.Determine the separate amounts of income tax expense for Pang and Sala as if they had filed separate tax returns.
2.Determine Pang's net income from Sala.

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Definitions:

Carbohydrate Molecules

Organic compounds consisting of carbon, hydrogen, and oxygen atoms, serving as a major energy source and structural component of living organisms.

Stroma

The supportive tissue framework of an organ, or the dense fluid within chloroplasts where the Calvin cycle occurs in photosynthesis.

Chloroplast

An organelle found in plant and algal cells that conducts photosynthesis, converting light energy into chemical energy stored in glucose.

ATP Synthase Complex

An enzyme complex that synthesizes ATP, the cell's energy currency, using a proton gradient across the membrane.