Up and its 80 percent owned subsidiary (Down) reported the following figures for the year ending December 31, 2011. Down paid dividends of $30,000 during this period.
|
Up |
Down |
|
|
Sales . . . . . . . . . |
($600,000) |
($300,000) |
|
Cost of goods sold |
300,000 |
140,000 |
|
Operating expenses |
174,000 |
60,000 |
|
Dividend income |
24,000 |
–0– |
|
Net income . . |
($150,000) |
($100,000) |
In 2010, unrealized gains of $30,000 on upstream transfers of $90,000 were deferred into 2011.
In 2011, unrealized gains of $40,000 on upstream transfers of $110,000 were deferred into 2012.
a. What figures appear in a consolidated income statement?
b. What income tax expense should appear on the consolidated income statement if each company files a separate return? Assume that the tax rate is 30 percent.