The pretax accounting incomes of Pam Corporation and its 100 percent-owned subsidiary, Sun Company, for 2016 are as follows (in thousands):

The only intercompany transaction during 2016 was a gain on land sold to Sun. 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?

Transcribed Image Text:

Pam Sun $4,000 $2,000 Sales Gain on land 800 4,8002,000 1,200 800 400 $ 400 Total revenue Cost of sales 2,000 2,800 1,600 $ 1,200 Gross profit Operating expenses Pretax accounting income