(Solution Download) The pretax accounting incomes of Pit Corporation and its 100


The pretax accounting incomes of Pit Corporation and its 100 percent-owned subsidiary, Sol Company, for 2011 are as follows (in thousands):
Pit Sol
Sales ........................... $2,000 .................. $1,000
Gain on land .................... 400 .................. -
Total revenue .................. 2,400 ................... 1,000
Cost of sales ................. 1,000 ................... 600
Gross profit .................... 1,400 ..................... 400
Operating expenses ........... 800 .................... 200
Pretax accounting income ... $ 600 ................... $ 200
The only intercompany transaction during 2011 was a gain on land sold to Sol. Assume a 34 percent flat income tax rate. The land remains unsold at year-end.
REQUIRED
1. What amount should be shown on the consolidated income statement as income tax expense if separate-company tax returns are filed?
2. Compute the consolidated income tax expense if a consolidated tax return is filed.
3. What will be the income taxes currently payable if separate income tax returns are filed? If a consolidated return is filed?

 







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