Common stock credit debit 112000 112000 48000 48000 in

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Unformatted text preview: 8 R 3-01 Page 25 Bank Corp. owns 80% of Shore Corp.'s outstanding capital stock. Shore's capital stock consists of 50,000 shares of common stock issued and outstanding. Shore's 1994 net income was $140,000. During 1994, Shore declared and paid dividends of $60,000. In conformity with generally accepted accounting principles, Bank recorded the following entries in 1994: Investment in Shore Corp. common stock Equity in earnings of subsidiary Cash Investment in Shore Corp. common stock Credit Debit $112,000 $112,000 48,000 48,000 In its 1994 consolidated tax return, Bank should report dividend revenue of: a. b. c. d. $48,000 $14,400 $9,600 $0 CPA-02057 Explanation Choice "d" is correct. In filing a consolidated federal income tax return, a corporate group eliminates the dividends from group members. Shore would have to be included in Bank's group consolidated income tax return because Bank owns 80% of Shore. Choices "a", "b", and "c" are incorrect, per the above explanation. CPA-02059 Type1...
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