Homework: Chapter C:2 Homework Save MyLab Accountii Score: 0 of 1 pt 5 of 6 (0 c

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Homework: Chapter C:2 Homework Save MyLab Accountii Score: 0 of 1 pt 5 of 6 (0 complete) HW Score: 0%, 0 of 6 pts Main Menu Assignments Do Homework Take a Quiz/Test PC:2-48 (similar to) Question Help Duval transfers $600,000 in cash to newly formed Murphy Corporation for 100% o Mu p 's stock n the first year of operations Murphys axab encome before any payments to Duval is $175,000. Read the requirements What total amount of taxable income must Duval and Murphy each report in the following scenario? Requirement a. Murphy pays a $40,000 dividend to Duval. Duval reports taxable income of Enter any number in the edit fields and then click Check Answer Clear All Check Answer emaining

Explanation / Answer

Total of 175000 will be shown as tax able income for the duval because as Murphy is a 100% subsidiary total profits of subsidiary will be transferred to the parent. Even thought the dividend is paid

Assuming that dividend is post acquisition dividend.

If it is pre acquisition dividend it should be adjusted against investment made in subsidiary.

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