Question: 1. Reggie, Inc. owns 70 percent of Nancy Corporation. During the current year, Nancy reported earnings before tax of $100,000 and paid a dividend of $30,000. The income tax rate for both companies is 30 percent. What deferred income tax liability arising in the current year must be recognized in the consolidated balance sheet?
A. $1,680.
B. $2,400.
C. $1,470.
D. $9,800.
E. $2,940.
2. Pear, Inc. owns 80 percent of Apple Corporation. During the current year, Apple reported earnings before tax of $400,000 and paid a dividend of $120,000. The income tax rate for each company is 40 percent and separate tax returns are prepared. What deferred income tax liability arising this year must be recognized in the consolidated balance sheet?
A. $0.
B. $7,680.
C. $17,920.
D. $38,400.
E. $51,200.