For each of the following situations, select the best answer concerning accounti

Question

For each of the following situations, select the best answer concerning accounting for income taxes in combinations:

(A) May file a consolidated income tax return.
(B) May not a file consolidated income tax return.
(C) Must file a consolidated income tax return.

_____1. Parent company owns 85% of the voting stock of the subsidiary, and there are significant intercompany transactions.
_____2. Subsidiary is a foreign corporation.
_____3. Parent company owns 90% of the voting stock of the subsidiary, but there are no intercompany inventory transactions.
_____4. Parent company owns 75% of the voting stock of the subsidiary but there are no intercompany inventory transactions.
_____5. Parent company owns 90% of the voting stock of the subsidiary, and there are intercompany inventory transactions with transferred goods in ending inventory.
_____6. Parent company owns 75% of the voting stock of the subsidiary and there are intercompany inventory transactions with transferred goods in ending inventory.

Explanation / Answer

1) (A) May file a consolidated income tax return.
2) (B) May not a file consolidated income tax return.

3) (A) May file a consolidated income tax return.
4) (B) May not a file consolidated income tax return.

5) (A) May file a consolidated income tax return.
6) (B) May not a file consolidated income tax return.

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