Consolidated income statement (downstream sales)
Taxable incomes for Pub Corporation and Sew Corporation, its 70 percent owned subsidiary, for 2011 are as follows (in thousands):
|
Pub |
Sew |
|
|
Sales |
$500 |
$300 |
|
Dividends received from Sew |
28 |
— |
|
Total revenue |
528 |
300 |
|
Cost of sales |
250 |
120 |
|
Operating expenses |
78 |
80 |
|
Total deductions |
328 |
200 |
|
Taxable income |
$200 |
$100 |
ADDITIONAL INFORMATION
1. Pub acquired its interest in Sew at a fair value equal to book value on December 31, 2010.
2. Sew paid dividends of $40,000 in 2011.
3. Pub sold $90,000 in merchandise to Sew during 2011, and there was $10,000 in unrealized profit from the sales at year end.
4. A flat 34% income tax rate is applicable.
5. Pub is eligible for the 80% dividends received deduction.
Required: Prepare a consolidation income statement workpaper for Pub Corporation and Subsidiary for 2011.