For Each of the Following Situations, Select the Best Answer

question 17

Short Answer

For each of the following situations, select the best answer concerning accounting for income taxes in combinations:
(A) May file a consolidated income tax return.
(B) May not a file consolidated income tax return.
(C) Must file a consolidated income tax return.
_____1. Parent company owns 85% of the voting stock of the subsidiary, and there are significant intercompany transactions.
_____2. Subsidiary is a foreign corporation.
_____3. Parent company owns 90% of the voting stock of the subsidiary, but there are no intercompany inventory transactions.
_____4. Parent company owns 75% of the voting stock of the subsidiary but there are no intercompany inventory transactions.
_____5. Parent company owns 90% of the voting stock of the subsidiary, and there are intercompany inventory transactions with transferred goods in ending inventory.
_____6. Parent company owns 75% of the voting stock of the subsidiary and there are intercompany inventory transactions with transferred goods in ending inventory.

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Definitions:

Average Total Cost

The total cost divided by the number of units produced, representing the cost per unit of output.

Average Variable Cost

Average Variable Cost is calculated by dividing the total variable cost (cost that changes with the amount of output) by the quantity of output produced.

Marginal Cost

An incremental expense associated with manufacturing one extra item of a product.

Average Fixed Cost

The total fixed costs divided by the number of units produced, representing how fixed costs dilute with increased production.