Ch 8 Mastery

Exercise 8-24 (a) (LO. 5)

The Parent consolidated group reports the following results for the tax year.

Entity Income or Loss

Parent $32,000

Sub 1 $15,000

Sub 2 ($5,000)

Sub 3 $20,000

If an amount is zero, enter "0". If required, round any division to two decimal places and use rounded amounts in subsequent computations. Round your final answers to the nearest dollar.

a.Assuming a 21% tax rate, what is the group's consolidated taxable income and consolidated tax liability?

Consolidated taxable income is $62000. The consolidated tax liability is $ 13020.

b.If the Parent group has consented to the relative taxable income method, how will the consolidated tax liability be allocated among the Parent and Subsidiaries 1, 2, and 3?

Parent ?

Sub 1 ?

Sub 2 0

Sub 3 ?

(The answer is not PARENT: 6219, SUB 1 : 2915,AND SUB 3: 3887) Feedback : Benefits accruing from the graduated corporate tax rates are apportioned equally among the group members unless all members consent to some other method through an annual election.