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
Investment in Shore Corp. common stock Credit Debit
48,000 In its 1994 consolidated tax return, Bank should report dividend revenue of:
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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