Valmont Owns 98% of the Stock of Barnes Corporation, a Manufacturer

question 40

Multiple Choice

Valmont owns 98% of the stock of Barnes Corporation, a manufacturer. During the current year, Barnes has operating income of $64,000, interest income of $10,000 from investments, and passive losses from investments in limited partnerships of $20,000. Barnes Corporation pays $12,000 in dividends. What is Barnes' taxable income for the current year?

• A)$34,000
• B)$48,600
• C)$54,000
• D)$62,000
• E)$74,000

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Definitions:

Notes Receivable

Financial assets representing amounts owed to a company by customers or other entities, typically resulting from sales or loans, that are evidenced by formal agreements.

Franchise Revenue

Income generated from franchising operations, which may include initial franchise fees, ongoing royalties, and other franchise-related income.

Cost of Goods Sold

Direct expenditures involved in the making of a company's sold products, which includes labor and material costs.

Freight Out

The cost of transporting goods from a seller's premises to the buyer's location, typically recorded as a selling expense by the seller.