White Company owns 60% of Cody Company. Separate tax returns are required. For 2017, White's operating...
White Company owns 60% of Cody Company. Separate tax returns are required. For 2017, White's operating income (excluding taxes and any income from Cody) was $300,000 while Cody reported a pretax income of $125,000. During the period, Cody declared total dividends of $25,000; $15,000 (60%) to White and $10,000 to the noncontrolling interest. White declared dividends of $180,000. The income tax rate for both companies is 30%.
Compute Cody's undistributed earnings for 2018.
A. $62,500.
B. $125,000.
C. $87,500.
D. $100,000.
E. $70,000.
Homework Answers
Answer: Option A ($62500)
Explanation :
Cody's undistributed earnings for 2018:
Undistributed Earnings = Pretax Income - Tax - Dividends distributed
= $125000 - $37500 - $25000
= $62500
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